What are the economic effects of a currency appreciation?
A. It will decrease aggregate demand and aggregate supply, so that output will certainly fall, and prices may fall as well.
B. It will increase aggregate demand and aggregate supply, so that output will certainly rise, and prices may rise as well.
C. It will increase aggregate demand and decrease aggregate supply, so that prices will certainly rise, and output may rise as well.
D. It will decrease aggregate demand and increase aggregate supply, so that prices will certainly fall, and output may fall as well.
Answer: D
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If the Fed decided to target price levels and inflation was lower than its target for a period of time, the Fed would be required to
A) permanently raise inflation above its target to reach and maintain its price level target. B) permanently lower its price level target to align it with the inflation rate. C) temporarily lower its inflation target to match its price level target. D) temporarily raise inflation above its target to reach its price level target.
Four propane delivery firms have a tacit agreement to charge a service fee of $50 in addition to $5 per gallon of propane. If the firms' cost of propane increases and one of the four firms advertises that it will increase the service fee to $75 next month, this is an example of ________.
A) a preannouncement B) a precommitment C) a meet-the-competition clause D) price leadership