The production possibilities curve illustrates:
a. the minimum quantity of two resources necessary to produce a given level of output
b. that when resources are currently being used inefficiently, it is possible to increase production of one good only by sacrificing some of another good.
c. that when resources are currently being used efficiently, it is possible to increase production of one good only by sacrificing some of another good.
d. the minimum quantities of output that can be produced using available resources.
c
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Suppose the target exchange rate set by the Fed is 100 yen per dollar. If the demand for dollars temporarily increases, to maintain the target exchange rate, the Fed can
A) sell dollars. B) buy dollars. C) violate interest rate parity. D) violate purchasing power parity.
Suppose policy makers want to increase Y and keep NX constant. Which of the following policies would most likely achieve this?
A) an increase in government spending B) a real depreciation C) an increase in government spending and a reduction in the real exchange rate D) a reduction in the real exchange rate E) encourage the country's trading partners to implement policies that will cause an increase in foreign income (Y)