Under a floating exchange-rate regime, following an expansion in the country's money supply, the country's monetary authority
A. must buy foreign currency in the foreign exchange market.
B. may not intervene in the foreign exchange market.
C. will be forced to reverse the monetary expansion.
D. must buy domestic currency in the foreign exchange market.
Answer: B
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Which of the following is a measure taken by the government to internalize externalities?
a. Value Added Tax b. Income Tax c. Cap and trade d. Tariffs e. Deficit financing
One of the potential economic problems associated with the extensive use of macropolicy to recover from the Great Recession is
A. the huge government deficits and the flood of money into the banks could set off an inflationary spiral. B. the large amount of government spending for job creation could result in rapid and uncontrollable increases in wages. C. the flood of money into the banks could cause excessive investment expenditures in the economy. D. the tax rebates made available to consumers could cause uncontrollable increases in the price of housing.