The basics of the ERM in the EC provided for:
A) flexible exchange rates and free capital flows.
B) fixed exchange rates based on the U.S. dollar.
C) gradual conversion to a common currency (the euro).
D) fixed exchange rates based on a weighted basket of currencies formula.
Ans: D) fixed exchange rates based on a weighted basket of currencies formula.
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When the Fed lowers the discount rate, it makes it
a. cheaper for banks to borrow from each other. b. cheaper for banks to obtain additional reserves by borrowing from the Fed. c. more difficult for banks to accept deposits. d. more difficult for banks to extend loans.
In a market where negative externalities are associated with consumption and production, the equilibrium will not be efficient because:
A. Too few resources will be allocated towards producing the good B. Firms will shut down until costs are reduced C. Costs of production will, on average, be too high D. Too many resources will be allocated towards producing the good