There is demand for and supply of dollars and a demand for and supply of pesos. Under a flexible exchange rate system, if income growth in the United States is greater than income growth in Mexico, then
A) the demand for dollars will shift to the right and the demand for pesos will shift to the left.
B) the demand for pesos will shift to the right and the supply of dollars will shift to the left.
C) the demand for pesos will shift to the left and the supply of pesos will shift to the right.
D) the supply of pesos will shift to the right and the supply of dollars will shift to the right.
E) none of the above
E
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M1 is a measure of
A) money and includes both currency and checking deposits. B) liquidity and in which the most liquid asset is money. C) money and includes both savings deposits and currency. D) money and includes both savings deposits and money market mutual funds.
If both the demand for a product and the supply of it increase, then the equilibrium quantity will ________ and the equilibrium price will ________.
A) decrease; increase B) decrease; decrease C) decrease; remain constant D) increase; either increase, decrease, or remain constant