Assume that policy makers are pursuing a fixed exchange rate regime and that the economy is initially operating at the natural level of output. Which of the following will occur as a result of a revaluation?
A) The real exchange rate will be permanently higher in the medium run.
B) The real exchange rate will be permanently lower in the medium run.
C) The effects of this revaluation on the real exchange rate will be ambiguous in the medium run.
D) The real exchange rate will be unchanged in medium run.
E) The nominal exchange will initially fall in the short run and then increase in the medium run.
D
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Suppose the economy is producing at the natural rate of output. A decrease in consumer and business confidence will cause ________ in real GDP in the short run and ________ in inflation in the short run, everything else held constant
A) an increase; an increase B) a decrease; a decrease C) no change; an increase D) no change; a decrease
Refer to Figure 6.1. At point C
A) the marginal product of labor is greater than the average product of labor. B) the average product of labor is greater than the marginal product of labor. C) the marginal product of labor and the average product of labor are equal. D) the marginal product of labor and the average product of labor are both increasing. E) Both B and D are correct.