What is depreciation, and what happens to the depreciation line when the rate of depreciation increases or decreases?
What will be an ideal response?
Depreciation refers to the reduction in the capital stock that occurs either because machinery, equipment, and other capital goods become worn out by use or because they become obsolete. When depreciation increases, the depreciation line becomes steeper, and when depreciation decreases, the depreciation line becomes flatter.
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The ________ the expected profit from holding a foreign currency, the greater is the ________ in the foreign exchange market
A) larger; quantity demanded of dollars B) smaller; quantity demanded of foreign currency C) larger; quantity supplied of dollars D) None of the above is correct because the expected profit has nothing to do with the supply and demand for dollars or foreign currency.
In the 1990s, the price level in Japan fell relative to the price level in the United States. If the exchange rate did not change, one would expect that:
A. both U.S. exports to Japan and U.S. imports from Japan would rise. B. U.S. exports to Japan would decline and U.S. imports from Japan would rise. C. both U.S. exports to Japan and U.S. imports from Japan would fall. D. U.S. exports to Japan would rise and U.S. imports from Japan would decline.