Refer to the scenario above. What is the payoff to Firm B in equilibrium?

A balance of payments crises under fixed exchange rates occurs when

A) a country runs out of foreign reserves. B) a country is in a liquidity trap. C) exports and imports expand beyond some point. D) marginal returns on foreign exchange investments approach zero. E) forward currency markets undergo high volatility.

The idea that nominal variables are heavily influenced by the quantity of money and that money is largely irrelevant for understanding the determinants of real variables is called the

a. velocity concept. b. Fisher effect. c. classical dichotomy. d. Mankiw effect.