Under a system of fixed exchange rates, what will happen if the price of a currency is set above market equilibrium? How can this be remedied?
A nation whose currency is overvalued will consistently import more than it exports, leading to a loss of currency reserves. To prevent this, the country can devalue its currency, adopt tariffs and quotas, or follow restrictive macroeconomic policy to promote deflation and higher interest rates.
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The assumption that wages change more slowly than prices implies that the
A) aggregate demand curve has a positive slope. B) aggregate demand curve has a negative slope. C) Phillips Curve has a negative slope. D) Phillips Curve has a positive slope.
Robert left a law firm to begin his own catering business. Robert’s salary at the law firm was $100,000. He put $40,000 of his own funds into the business to purchase cooking equipment. His funds were previously earning 10 percent per year. The cost of operating the business including food and supplies was $60,000. Robert’s catering firm earned $170,000 in revenues for the first year. Robert’s brother insists that he should go back to the law firm, since he was making $100,000 there. Robert says his brother is wrong. Robert is right because
A. he is making $6,000 in economic profits. B. he is making $110,000 in accounting profits. C. he is making $106,000 in economic profits. D. he likes cooking.