A depreciation of a nation's currency is
A) a situation in which exchange rates are allowed to fluctuate in the open market in response to changes in supply and demand.
B) the increase in the exchange value of one nation's currency in terms of an other nation.
C) a nation in which households, firms, and governments buy and sell national currencies.
D) the decrease in the exchange value of one nation's currency in terms of another nation.
Answer: D
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The consumption function shows how much
A) households plan to consume per year at each possible interest rate. B) real disposable income people will earn at each income tax bracket. C) households plan to consume per year at each level of real disposable income. D) households plan to consume per year at each level of savings.
A U.S. firm currently produces 200 units of output according to the production function q = L0.5K0.5 and faces input prices equal to wU.S. = rU.S = $11. Should the U.S. firm move their company abroad where they will face input prices equal to wabroad = $6.50 and rabroad = $15.00?
A) Yes, because the total costs will fall from $3,859 to $2,810. B) No, because the total costs will increase from $2,810 to $3,859. C) No, because the firm has decreasing returns to scale. D) Not enough information is given to answer this problem.