Assuming the central bank follows a money supply target, then an increase in the demand for money
a. will shift the position of the LM schedule away from the predicted level even if the target level of the money supply is achieved.
b. will shift the position of the LM schedule toward the predicted level as long as the target level of the money supply is achieved.
c. may or may not shift the position of the LM schedule away from the predicted level even if the target level of the money supply is achieved.
d. None of the above
A
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To maintain a fixed exchange rate, in response to an increase in the government budget deficit the central bank must
a. sell foreign currency from reserves. b. buy foreign currency. c. raise taxes. d. raise government spending. e. pass a law that increases the exchange rate.
Consider the following information, and assume that opportunity costs are constant: On one hand, residents of Country A can produce more corn in a year than residents of Country B, but they can produce computers at a lower opportunity cost than residents of country B. On the other hand, residents of country B can produce more computers in a year than residents of Country A, but they can produce corn at a lower opportunity cost than residents of country A. It can be concluded that residents of
A) Country A should produce corn and trade it for computers produced in Country B. B) Country B should produce computers and trade them for corn produced in Country B. C) Country A should produce computers and trade them for corn produced in Country B. D) both countries should choose not to trade.