Discuss how trade policies can be used to maintain a fixed exchange rate.
What will be an ideal response?
If a country hopes to maintain a certain exchange rate, it will need to control the flow of trade and finance. Suppose China pegs its currency to the U.S. dollar. If China were to face a shortage of dollars, it should attempt to decrease imports and increase exports. To limit the amount of goods and services imported from the United States it may implement barriers of trade, such as tariffs, quotas, and taxes on financial assets. To increase exports to the United States subsidies and other incentives could be used. If China were to face a surplus of dollars the reverse should be done: increase imports and decrease exports.
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When the demand for an imperfect competitor's product is greater than it planned, the firm will
A) increase the price of the product until supply equals demand. B) meet the demand at its set price. C) reduce the price until supply equals demand. D) allow a shortage of the product to develop, without changing the product's price.
Since 1948, the labor force participation rate for adult men has ________ and for adult women has ________
A) increased; increased B) increased; decreased C) decreased; increased D) decreased; decreased