When there are few unemployed resources, additional spending will tend to
a. flow directly to the unemployed resources, so that the multiplier can be maintained at 1/1-mpc.
b. increase the marginal propensity to consume, and thereby increase the size of the multiplier.
c. increase the demand for resources and drive prices downward, increasing the size of the multiplier.
d. bid resources away from other activities and drive prices upward, reducing the size of the multiplier.
D
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A production possibilities curve is negatively sloped because: a. unemployment increases as an economy moves down along the curve
b. along the curve, production of one good must be sacrificed in order to increase production of another. c. unemployment decreases as an economy moves down along the curve. d. as the price falls, more goods are purchased.
Assume a U.S. investor buys a Mexican bond with a face value of MXP 1,000 and a 20 percent annual interest yield while the exchange rate is MXP 10 per dollar. What is the dollar return from the bond if the exchange rate at the end of the year is MXP 11 per dollar?
a. 9.1% b. 10.0% c. 18.2% d. 20.0% e. 32.0%