Explain Gresham's Law
When there are two forms of money available, people prefer to spend the form of money that is less valuable. Thereby giving rise to the phrase "Cheap money drives out dear money." For instance if there is paper money and silver coins, it is more likely that individuals will hoard the silver coins hoping that the value of them will increase. In this instance the paper money is the cheap money.
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If the U.S. dollar depreciates against the yen below the targeted exchange rate, the U.S. Federal Reserve has to intervene in the foreign exchange market such that:
a. the U.S. demand for yen rises. b. the supply of U.S. dollars rises. c. U.S. exports to Japan fall. d. the U.S. dollar is devalued. e. the supply of U.S. dollars falls.
The difference in the price the buyer pays and the price the sellers keep in the presence of a tax is called:
A. a tax differential. B. a tax wedge. C. the tax incidence. D. the tax burden.