Explain why the oil price shocks after 1973 made countries unwilling to revive the Bretton Woods system of fixed exchange rates. See also Chapter 19

What will be an ideal response?

Using the GG-LL framework will help solve this question. The oil price shock of 1973 pushes the LL curve upward and to the right. Thus, the level of economic integration at which it becomes worthwhile to join the currency rises. In general, increase variability in the product markets makes countries less willing to enter fixed exchange rate areas. This prediction helps explain why the oil price shocks after 1973 made countries unwilling to revive the Bretton Woods system of fixed exchange rates.

Economics

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Both a perfectly competitive firm and a monopolist:

a. maximize profit by setting marginal cost equal to marginal revenue. b. always earn an economic profit. c. are price takers. d. maximize profit by setting marginal cost equal to average total cost.

Economics

Assume the required reserve ratio is 10 percent and the FOMC orders an open-market sale of $50 million in government securities from member banks. If the oversimplified money multiplier is assumed, then the money supply will

A. increase by $500 million. B. increase by $100 million. C. decrease by $100 million. D. decrease by $500 million.

Economics