Which system of interest rates is theoretically worst for policy coordination among the industrial countries of the world? How has this played out since the 1980s?
What will be an ideal response?
— pro-fixed rate theorists predicted that with floating rates, countries would only make policies that helped themselves at the expense of the world economy (although it has been empirically proven that in the short run policy decisions are exported, requiring the "dirty float")
— pro-floaters rebutted that the fixed rate system provided coordination only by giving the U.S. a dominant position
— during the 1980s industrial countries could have collectively reduced the effects of recession by coordinating their policies much more effectively, that is floating rates have not provided more coordination as predicted
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A trade bloc allows member countries to import from other member countries freely, but imposes trade barriers against imports from countries outside the bloc.
Answer the following statement true (T) or false (F)
If a perfectly competitive firm charges a price that is equal to its average total cost:
A. the firm is earning an economic profit equal to zero. B. the firm is earning an economic profit greater than zero. C. the firm is earning an economic profit less than zero. D. It is not possible to determine anything about the firm's profits.