The above figure shows your budget line and indifference curves. What quantities of gasoline and movie rentals would you choose?

If the Fed wants to lower the U.S. exchange rate, what action should it take in the foreign exchange market? Why does the action lower the exchange rate?

What will be an ideal response?

If the marginal rate of return expected from a purchase of equipment is greater than the market interest rate, the firm should

a. not purchase the equipment b. purchase the equipment c. either purchase or not purchase the equipment, depending on the marginal resource cost d. inform stockholders that the company expects a decrease in earnings from the purchase e. seek government assistance in raising market interest rates