For a country with flexible exchange rates, if a nation's interest rate rose, what effect would this have on its current account balance?
a. No effect because interest has no effect on the current account.
b. Increase it because foreign capital flows would be attracted to the nation thereby building economic strength.
c. Decrease it because the exchange rate will appreciate.
d. Increase it because the exchange rate will depreciate.
e. Decrease because the exchange rate will depreciate.
.C
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If a firm operating in a competitive industry shuts down in the short run, it can avoid paying
a. fixed costs. b. variable costs. c. total costs. d. The firm must pay all its costs, even if it shuts down.
Caroline is the owner of a hair-styling salon and spa. She decides to raise the wages of her workers even though she faces an excess supply of labor. Her decision
a. might increase profits if it attracts a better pool of workers to apply for jobs at her salon. b. will increase the excess supply of labor. c. may increase the quality of her work force. d. All of the above are correct.