The interest rate on some Brazilian bank accounts is 700 percent per year. If you put 1 Brazilian real (Brazil's currency) in a bank today, it will be worth 8 reals next year! Why then don't we all wire our U.S. dollars to Brazilian banks?
a. The Brazilian government keeps the exchange rate fixed during the year, which wipes out your financial gain
b. The Brazilian balance of payments becomes negative, which results in higher taxes, much of it from your financial gain.
c. The U.S. government prohibits U.S. investment in foreign financial institutions.
d. People engaging in arbitrage will quickly adjust the rates to make the Brazilian interest rate no more attractive than U.S. interest rates.
e. The exchange rate reals per dollar adjusts during the year so that you are no better off once you convert your reals back into dollars.
E
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Which of the following changes would NOT shift the aggregate demand curve?
A) a change in fiscal policy B) a change in monetary policy C) a change in expectations about future income D) an increase in technology
If the money wage rate rises and potential GDP remains the same, does the LAS curve or the SAS curve shift or is there a movement along the LAS curve or the SAS curve?
What will be an ideal response?