A profit-maximizing firm invests up to the point at which the marginal rate of return on capital is greatest

How do you determine is a foreign exchange market is efficient?

A) See if the market rates adjust quickly to new and relevant information. B) See if systematic profit opportunities are quickly eliminated. C) See if forward rates are equal to expected future spot rates. D) All of the above should be true if a foreign exchange market is efficient.

The Fed can surely reduce the rightward shift of the AD curve, but

a. stock and bond prices may fall dramatically b. inflation may rise sharply c. inflation would change in an unpredictable fashion d. recession may result e. unemployment may fall to below the natural rate