If the Chinese government were to begin selling large quantities of its dollar-denominated assets, how might that affect China's economy and the U.S. economy?
What will be an ideal response?
If the dollar-denominated assets are exchanged for yuan, the $/yuan exchange rate will rise and the money supply in China will decline. Both nominal appreciation and the increase in the interest rate will slow economic growth in China and lower inflation. If the dollar-denominated assets are replaced by other foreign assets (e.g., euro- or yen-denominated), then only the dollar depreciation will occur. Depreciation of the dollar will boost U.S. exports and increase inflation in the U.S.
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If the velocity of money is constant, then a 2% increase in the money supply
A) must be the result of a 2% increase in the price level. B) would change nominal GDP by a smaller percentage. C) would change nominal GDP by an equal percentage. D) would change nominal GDP by a larger percentage.
Which of the following statements is correct?
A. When marginal utility is decreasing, an increase in the quantity consumed will decrease total utility B. When marginal utility is positive, an increase in the quantity consumed will decrease total utility C. When marginal utility is positive, an increase in the quantity consumed will increase total utility D. When marginal utility is zero, an increase in the quantity consumed will make total utility zero