Compared to a system of fixed exchange rates, currency unions are beneficial because they
A) allow exchange rates to float.
B) allow every country to have an independent monetary policy.
C) reduce the costs of trading goods and assets.
D) restrict what countries can do with fiscal policy.
C
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Assume the U.S. government wants to hold the value of the dollar at $1.00 U.S. equals 120 Japanese yen, but it finds that the value of yen is appreciating against the U.S. dollar. What would be an appropriate policy to reverse this trend?
A) Buy more Japanese goods. B) Buy U.S. dollars. C) Sell U.S. dollars. D) Encourage U.S. investments abroad.
If two goods, X and Y, are complements, then which of the following statements is FALSE?
A. An increase in the price of X causes the demand for Y to rise. B. A decrease in the price of Y causes an increase in the demand for X. C. They are consumed together. D. When the quantity demanded of X increases, the demand for Y increases.