In the Mundell-Fleming model with perfect capital mobility, the domestic interest rates are determined by
a. monetary policy.
b. the IS and LM curves.
c. domestic savings and investment.
d. budget deficits.
e. none of the above.
E
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When we measure the impact of exchange rate changes on a nation's trade balance, the bilateral exchange rates explain only part of the change. To assess the overall change, we need to calculate:
a. the home multilateral exchange rate, or real effective exchange rate. b. a nation's income versus income changes in the rest of the world. c. a nation's marginal propensity to consume imports. d. the movement over time of the trade balance along with long-run expectations of the exchange rate.
The government proposes a tax on halogen light bulbs. Sellers will bear the entire burden of the tax if the
A) demand curve for halogen bulbs is vertical. B) demand curve is downward sloping and the supply curve is upward sloping. C) supply curve of halogen bulbs is horizontal. D) demand curve for halogen bulbs is horizontal.