Using the GG-LL framework, analyze the effect of an increase in the size and frequency of sudden shifts in the demand for a country's exports
What will be an ideal response?
Such a change pushes LL upward and to the right. Thus, the level of economic integration at which it becomes worthwhile to join the currency rises. In general, increased variability in the product markets makes countries less willing to enter fixed exchange rate areas. This prediction helps explain why the oil price shocks after 1973 made countries unwilling to revive the Bretton Woods system of fixed exchange rates. See also Chapter 19.
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The best definition of inflation is
a. a temporary increase in prices. b. an increase in the price of one important commodity such as food. c. a persistent increase in the general level of prices as measured by a price index. d. an increase in the purchasing power of the dollar.
A nation's real GDP was $250 billion in 2013 and $265 billion in 2014. Its population was 120 million in 2013 and 125 million in 2014. What is its real GDP growth rate in 2014?
A. 15.0% B. 6.0% C. 5.7% D. 1.1%