Assume that there is an excess supply of euros in the foreign exchange market. If a fixed exchange rate system exists with the United States, the European Central Bank would have to __________ to prevent the euro from __________

The gravity equation was tested and found to be very accurate in predicting:

a. world trade in total. b. trade between various provinces in Canada and American states. c. trade between the United States and Japan. d. trade between nations in the European Union.

On the graph above, suppose the economy is at point 1. Which sequence of points best illustrates the short-run and then long-run impacts of a permanent tax reduction? [Assume that potential output remains constant at .]

A) 2, 4, 1 B) 7, 2, 5 C) 2, 7, 6 D) 7, 8, 1