Describe how a sustained depreciation of the U.S. dollar over time is likely to affect U.S. net exports.
What will be an ideal response?
The depreciation of the U.S. dollar should lead to improved net exports as foreigners will find the purchasing power of their money rising relative to goods priced in U.S. dollars. Conversely, Americans will find foreign goods more expensive in terms of the U.S. dollars they need to exchange for foreign currency to buy foreign goods. Consequently, U.S. exports will rise and U.S. imports will fall, thus increasing net exports and contributing to an increase in aggregate expenditures.
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A chief reason firms give employees bonuses based on the firm's profit is to cope with
A) the tax laws. B) the law of diminishing returns. C) the principal-agent problem. D) unions.
Suppose there are two perfectly competitive industries with similar numbers of firms but where one industry consists of N identical firms while the second consists of N firms with differing costs. Compared to the short-run supply curve of the industry with identical firms, the short-run supply curve of the differing cost industry will tend to be
A) steeper at higher prices. B) flatter at higher prices. C) steeper at lower prices. D) flatter at lower prices.