Equilibrium, in the short run, is achieved when:
a. differences in rates of return cause investors to purchase and sell currency and thereby change the spot rate of exchange.
b. the government recognizes a problem and takes action to correct it.
c. traders adjust their expectations to match reality.
d. inflation falls to zero.
Ans: a. differences in rates of return cause investors to purchase and sell currency and thereby change the spot rate of exchange.
You might also like to view...
Refer to the above table. If opportunity costs are constant, the two countries will gain from trade at a rate of exchange of
A) 0.1 computer for 1 bicycle. B) 5 computers for 1 bicycle. C) 1 computer for 1 bicycle. D) 8 bicycles for 1 computer.
Concentration of industries can lead to external economies for all of the following reasons EXCEPT
A) concentrated industries will not be competitive. B) concentrated industries will attract a network of input suppliers. C) concentrated industries will attract a deep pool of skilled labor. D) concentrated industries will experience knowledge spillovers.