The Federal Reserve Bank was first established in the U.S. by an Act of Congress passed in

An increase in the domestic one-year interest rate expected to occur in, say, two years will, all else fixed, have which of the following effects in a flexible exchange rate regime?

A) The real exchange rate will increase with no change in the nominal exchange rate. B) The nominal exchange rate will increase with no change in the real exchange rate. C) Both the real and nominal exchange rate will increase. D) No change in either the nominal or real exchange rate.

Assume that a perfectly competitive constant-cost industry is in long-run equilibrium when market demand suddenly decreases. Which of the following statements is incorrect?

a. Existing firms will start to suffer short-run losses b. Existing firms will shut down in the short run if average variable cost exceeds average revenue at all output levels c. Some firms will leave the industry in the long run d. The market supply curve will shift to the right in the long run e. Any short-run losses will be eliminated in the long run