A currency depreciation affects total spending in the short run through expenditure switching, but the net external wealth effect also can influence:
A) other types of expenditure such as consumption or investment.
B) the ability of the nation to keep up technologically, since new capital will be more expensive.
C) the production function of the home country.
D) the ability of the government to conduct monetary policy.
Ans: A) other types of expenditure such as consumption or investment.
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When the Fed buys bonds in the open market, we can expect the
A) exchange rate to rise and interest rates to fall. B) exchange rate and interest rates to rise. C) exchange rate to fall and interest rates to rise. D) exchange rate and interest rates to fall.
If 1 U.S. dollar exchanges for 0.65 euro, how much would it cost in U.S. dollars and cents to purchase a bottle of Italian wine priced at 40 euro?
What will be an ideal response?