In the foreign exchange market, how does a change in expected future U.S. exchange rate affect the supply of dollars?
What will be an ideal response?
Changes in the expected future exchange rate change the supply of dollars. If the expected future exchange rate falls, the supply of dollars increases and the supply curve shifts rightward because the expected profit from holding dollars decreases. If the expected future exchange rate rises, the supply of dollars decreases and the supply curve shifts leftward because the expected profit from holding dollars increases.
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If the marginal productivity of labor decreases, then
A) the quantity of labor demanded at every possible wage rate will be less. B) the quantity of labor demanded at every possible wage rate will be higher. C) the quantity of labor demanded will not be affected. D) the demand curve for labor will shift upward and to the right.
The rational expectations theory indicates that expansionary policy will
a. stimulate real output in the long run but not in the short run. b. expand real output and employment if the public quickly anticipates the effects of the expansionary policy. c. equalize real and nominal interest rates during lengthy periods of inflation. d. fail to increase employment because individuals will anticipate it and take actions that will offset its impact.