Both France and the United Kingdom successfully used exchange-rate targeting to lower inflation in the late 1980s and early 1990s by tying the value of their currencies to the

Because of product differentiation, firms

A) do not have to compete because their products are unique. B) cannot compete on price. C) can compete on the basis of quality. D) are unable to compete by using advertising. E) must compete on only price.

Can a Keynesian still believe in an active counter-cyclical policy if she adopts the assumption of rational expectations?

A) No, it destroys the case for active policy. B) Yes, so long as she continues to assume wage and price rigidity. C) Yes, if she also adopts the assumption of wage and price flexibility. D) Yes, if she assumes that economic policy shifts are anticipated in advance.