In 1991, Argentina decided to peg its currency (the Argentinean peso) to the U.S. dollar. Most of Argentina's trading, however, was with Brazil and Europe, not the United States. What result would pegging the Argentinean peso to the U.S
dollar have on the cost of imports from and exports to Brazil and Europe?
If Argentina pegs its currency to the dollar, the prices of the goods it purchases and the prices of the goods it sells to foreign countries will be determined by the value of the dollar. If the value of the dollar is rising relative to the euro and the Brazilian real, then Argentinean goods are also rising in price. The result will be a decrease in Argentinean exports to foreign countries (and an increasing current account deficit, as Argentina discovered).
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The major assets on a bank's balance sheet are its
A) checking and savings account deposits. B) loans, and checking and savings account deposits. C) reserves, loans, and checking account deposits. D) reserves, loans, and holdings of securities. E) reserves, checking and savings account deposits.
Suppose that a mayor of a large city believes strongly that education provides great benefits to the community and urges the state government to provide the district with more money. An economist would say that this reflects the Mayor's belief that: a. since teachers are overpaid, the district needs more money to hire enough teachers for its classrooms. b. there are positive external benefits
associated with education. c. there are nontrivial external costs associated with education. d. public schools provide a higher quality education than private schools.