Illustrate the effectiveness of monetary policy with fixed exchange rates
What will be an ideal response?
The required intervention to maintain the fixed exchange rate will undo any effect on income of an increase or decrease in the money supply. Illustrate by shifting LM curve and then explaining how intervention will return LM to original position.
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Refer to the figure above. Social welfare will be maximized if ________ units of Good Y are produced
A) 9 million B) 20 million C) 13 million D) 16 million
Past expenses are irrelevant to supply decisions, because
A) expenses incurred in the past never affect the opportunities available in the present. B) it is essential to avoid bankruptcy. C) no one remembers the past. D) supply decisions depend on opportunities that will have to be forgone, not opportunities already forgone.