Explain and show graphically the effect of an increase in the expected future exchange rate on the equilibrium exchange rate, everything else held constant
What will be an ideal response?
See figure below.
When the expected future exchange rate increases, the relative expected return on the domestic assets increases. This will cause the demand for domestic assets to increase and the current value of the exchange rate will appreciate.
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A price war:
A. is one possible consequence of oligopolistic rivalry. B. never occurs in oligopolistic markets. C. results in higher profits for sellers. D. occurs only under perfect competition.
Which of the following would a Keynesian economist be most likely to stress?
a. Supply creates its own demand. b. Businesses will not produce goods and services if they do not think people will buy them. c. You cannot spend your way out of a recession. d. When the unemployment rate is high, wage rates will fall. e. A dollar saved is a dollar earned; a high rate of saving is the key to prosperity.