Which of the following problems will most likely occur with a system of flexible exchange rates?
A. Macroeconomic instability as exports and imports fluctuate with the exchange rates.
B. Government favoritism toward selected importers of goods and services.
C. The emergence of black markets for foreign currency.
D. Distortions in trade patterns away from the pattern suggested by comparative advantage.
A. Macroeconomic instability as exports and imports fluctuate with the exchange rates.
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If the spot rate for euros depreciates, and all other variables and expected values remain constant, U.S. investors contemplating European investments would:
a. get larger returns in terms of dollars. b. get smaller returns in terms of dollars. c. get very similar returns because of arbitrage. d. lose the principal of the investment.
Refer to Figure 15-17. The faculty member who designed the course argues: "I think the course should be priced so that the maximum number of students enroll." Which price should this faculty member favor?
A) $0 B) $40 C) $88 D) $150