If a lower exchange rate spurs exports then why wouldn't it be a good idea of policymakers to intervene to push the exchange rate as low as they can?
What will be an ideal response?
If a lower exchange rate were the key to growing exports then policymakers could simply push the exchange rate so low that the currency becomes worthless. In this case if would be difficult to see why anyone would continue to accept this nation's currency for payment of goods. Eventually this policy would have the opposite effect and exports would decline. At the same time the lower value of the currency would require consumers to pay even more for imported goods.
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If unemployment is at the natural rate, then there
A) is no cyclical unemployment. B) is no frictional unemployment. C) will be cyclical and frictional unemployment but not structural unemployment. D) will be only cyclical unemployment.
Refer to Figure 7-2. The tariff causes domestic consumption of coffee
A) to rise by 20 million pounds. B) to fall by 27 million pounds. C) to rise by 6 million pounds. D) to fall by 7 million pounds.