Explain how the Fed intervenes in the foreign exchange market and what the effects are of the Fed's actions
What will be an ideal response?
The Fed changes the value of the exchange rate by buying or selling dollars in the foreign exchange market. If the Fed deems it necessary to appreciate the exchange rate (raise the exchange rate) it will buy dollars. By so doing it increases the demand for dollars and thereby raises the exchange rate. If the Fed wants to depreciate the exchange rate (lower the exchange rate) the Fed will sell dollars. By selling dollars the Fed will increase the supply of dollars and lower the exchange rate.
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According to Keynes, the marginal propensity to consume is constant when income increases
Indicate whether the statement is true or false
At a product's equilibrium price
A) anyone who needs the product will be able to buy the product, regardless of ability to pay. B) the federal government will provide the product to anyone who cannot afford it. C) not all sellers who are willing to accept the price will find buyers for their products. D) any buyer who is willing and able to pay the price will find a seller for the product.