When policy makers decide to devalue the currency, such an action generally represents
A) a decision to let the currency float.
B) an increase in the pegged value of the domestic currency.
C) a reduction in the foreign price level.
D) a reduction in the domestic price level.
E) none of the above
D
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Every spring, motorists do more driving than during the winter months. Every spring, the price of gasoline increases and the motorists buy more gasoline. This experience suggests that the
A) "law of supply" does not always hold for necessities like gasoline. B) "law of demand" does not always hold for necessities like gasoline. C) laws of supply and demand are both contradicted for gasoline, though only during the spring driving season. D) None of the above answers are correct.
The current account deficits incurred by the United States in the 1980s were caused, in the opinion of many economists, by
A) federal budget deficits. B) a sharp decline in private saving. C) "flight to quality" as foreign investors favored U.S. investments. D) Both B and C are correct.