The real exchange rate is an adjustment of the nominal exchange rate to account for
a. inflation at home and abroad
b. supply and demand in the market
c. government's assessment of its value
d. currency amounts held by governments
e. none of the above
A
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Which of the following statements about the marginal rate of substitution is NOT correct?
A) It measures the number of units of the good on the horizontal axis that a consumer must be compensated with to give up a unit of the good on the vertical axis, while remaining on the same indifference curve. B) It is measured by the slope of the indifference curve. C) It decreases in value when moving downward along a typical-shaped indifference curve. D) It is constant for goods that are perfect substitutes.
A central bank that is buying its own currency might be trying to ________
A) weaken its currency B) increase the domestic money supply C) reduce domestic interest rates D) reduce inflation