Applied Economics Exam
Bank
Course
Introduction
Applied Economics explores the practical implementation of economic theories and principles to real-world situations and policy issues. This course examines how economic models can be used to analyze, interpret, and solve problems in various sectors such as business, government, health, and the environment. Students will develop the skills needed to collect and interpret data, evaluate economic policies, and make informed decisions based on empirical evidence. Through case studies and practical applications, the course emphasizes critical thinking and analytical skills, preparing students to address contemporary economic challenges in professional and academic contexts.
Recommended Textbook Economics 4th Edition by R. Glenn Hubbard
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30 Chapters
4273 Verified Questions
4273 Flashcards
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Page 2
Chapter 1: Economics: Foundations and Models
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Sample Questions
Q1) Suppose that some teachers have decided that economic and financial uncertainty have made the prospect of retiring more risky,and therefore carry a higher cost than not retiring.By using all available information as they act to achieve their goals,these teachers are exemplifying the economic idea that
A) people are rational.
B) people respond to economic incentives.
C) optimal decisions are made at the margin.
D) equity is more important than efficiency.
Answer: A
Q2) Markets promote
A) equity and competition.
B) voluntary exchange and equality.
C) equity and equality.
D) competition and voluntary exchange.
Answer: D
Q3) What is the difference between an invention and an innovation?
Answer: An invention is the development of a new good or a new process for making a good.An innovation is the practical application of an invention.Innovation could also refer to any significant improvement in a good or in the means of producing a good.
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Page 3
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Sample Questions
Q1) Refer to Table 2-3.What is Serena's opportunity cost of making a bracelet?
A) 2 necklaces
B) 1/2 of a bracelet
C) 1/2 of a necklace
D) 3/4 of a bracelet
Answer: A
Q2) In the circular flow model,producers
A) sell goods and services in the input market.
B) and households spend earnings from resource sales on goods and services in the factor market.
C) hire resources sold by households in the factor market.
D) spend earnings from resource sales on goods and services in the product market.
Answer: C
Q3) If a country is producing efficiently and is on the production possibilities frontier,the only way to produce more of one good is to produce less of the other.
A)True
B)False
Answer: True
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Chapter 3: Where Prices Come From: the Interaction of
Demand and Supply
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Sample Questions
Q1) If an increase in income leads to a decrease in the demand for popcorn,then popcorn is
A) an inferior good.
B) a neutral good.
C) a necessity.
D) a normal good.
Answer: A
Q2) If consumers believe the price of iPads will decrease in the future,this will cause the demand for iPads to decrease now.
A)True
B)False
Answer: True
Q3) Refer to Figure 3-1.A decrease in the price of the product would be represented by a movement from
A) A to B.
B) B to A.
C) D1 to D2.
D) D2 to D1.
Answer: A
Page 5
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Chapter 4: Economic Efficiency, government Price Setting, and Taxes
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Sample Questions
Q1) Refer to Figure 4-9.Suppose the market is initially in equilibrium at price P<sub>0</sub> and now the government imposes a tax on every unit sold.Which of the following statements best describes the impact of the tax? For demand curve D<sub>0</sub>
A) the producer bears a greater share of the tax burden if the supply curve is S<sub>1</sub>.
B) the producer bears a greater share of the tax burden if the supply curve is S<sub>0</sub>.
C) the producer's share of the tax burden is the same whether the supply curve is S<sub>0</sub> or S<sub>1</sub>.
D) the producer bears the entire burden of the tax if the supply curve is S<sub>0</sub> and the consumer bears the entire burden of the tax if the supply curve is S<sub>1</sub>.
Q2) Refer to Table 4-3.If a minimum wage of $9.50 an hour is mandated,what is the quantity of labor supplied?
A) 40,000
B) 570,000
C) 610,000
D) 1,180,000
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Chapter 5: Externalities, environmental Policy, and Public Goods
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Sample Questions
Q1) A product is considered to be rivalrous if
A) you can keep those who did not pay for the item from enjoying its benefits.
B) you cannot keep those who did not pay for the item from enjoying its benefits.
C) your consumption of the product reduces the quantity available for others to consume.
D) it is jointly owned by all members of a community.
Q2) State the Coase theorem.
Q3) The basic cause of deadweight losses from the existence of common resources and externalities is
A) a lack of clearly defined and enforceable property rights.
B) the self interested rationality of human beings.
C) the use of a market system to deal with scarcity.
D) the absence of government intervention.
Q4) Refer to Figure 5-3.The private profit maximizing output level is
A) Qm.
B) Qn.
C) Qo.
D) Qo - Qm.
Q5) How does a negative externality in production reduce economic efficiency?
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Chapter 6: Elasticity: The Responsiveness of Demand and Supply
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Sample Questions
Q1) Suppose a 4 percent increase in income results in a 2 percent decrease in the quantity demanded of a good.Calculate the income elasticity of demand for the good and determine what type of good it is.
Q2) Jenna runs a small boutique in Capitola.She tells one of her suppliers that she is willing to pay $6 for a pair of wool hand warmers and not a dime more.On the basis of this information,what can you conclude about her price elasticity of demand for wool hand warmers?
A) It is elastic.
B) It is perfectly elastic.
C) It is perfectly inelastic.
D) The price elasticity coefficient is 0.
Q3) Suppose a 4 percent increase in price results in a 2 percent increase in the quantity supplied of a good.Calculate the price elasticity of supply and characterize the product.
A) 2; The product is elastic.
B) 0.2; The product is inelastic.
C) 0.5; The product is inelastic.
D) 50%; The product is inelastic.
Q4) Explain the relationship between price elasticity of demand and total revenue.
Page 8
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Chapter 7: The Economics of Health Care
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Sample Questions
Q1) A goal of market-based reforms of the health care system is to give patients an incentive to pay more attention to the prices of medical services.This would tend to ________ economic efficiency by ________ the costs of medical services
A) increase; increasing B) increase; decreasing C) decrease; increasing D) decrease; decreasing
Q2) What is an externality? Explain how someone receiving a meningitis vaccination is an example of an externality in the market for health care.
Q3) Suggest three ways by which health insurance companies can reduce adverse selection?
Q4) "Cost disease" refers to the tendency for low productivity in the service sector to lead to higher costs in those industries.
A)True
B)False
Q5) How can improvements in health increase a country's total income?
Q6) Briefly describe are the 6 main provisions of the Patient Protection and Affordable Care Act (PPACA)?
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Chapter 8: Firms, the Stock Market, and Corporate Governance
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Sample Questions
Q1) When Internet coupon site Groupon sold stock to the public for the first time following its IPO in November 2011,it did so through the NASDAQ market.This was an example of Groupon using ________ to raise funds.
A) indirect finance
B) direct finance
C) bonds
D) corporate governance
Q2) In a typical year,________ of new jobs are created by small firms.
A) less than 5 percent
B) 10 percent
C) 40 percent
D) 75 percent
Q3) Southwest Airlines wants to raise $20 million to finance the renovation of their corporate offices,and the company wishes to raise the funds through direct finance.Which of the following methods could it use?
A) It could issue $20 million in stocks.
B) It could sell $20 million in bonds.
C) It could borrow $20 million from a bank.
D) It could choose either A or B.
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Chapter 9: Comparative Advantage and the Gains From International Trade
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Sample Questions
Q1) Which of the following describes the infant industry argument for protectionism?
A) An industry must be protected in its early stages of development so that firms can compete with government-subsidized foreign competition.
B) Some strategic industries must be protected to ensure adequate supplies of resources needed for national defense in emergencies.
C) Domestic producers in high-wage countries must be protected from foreign producers in low-wage countries to produce a level playing field.
D) Domestic producers require time to gain experience and lower their unit costs; this will allow these producers to compete successfully in international markets.
Q2) Twenty-seven countries in Europe have eliminated all tariffs with each other.This group of countries is known as the A) European Union.
B) United Federation of Europe.
C) Gruppo Euro.
D) European Free Trade Association.
Q3) What is autarky?
Q4) Distinguish between a voluntary export restraint and a quota.
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Chapter 10: Consumer Choice and Behavioral Economics
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Sample Questions
Q1) Most people would prefer to drive a luxury car that has all the options,but more people buy less expensive cars even though they could afford the luxury car because A) car buyers are irrational.
B) the total utility of less expensive cars is greater than that of luxury cars.
C) the marginal utility per dollar spent on the less expensive car is higher than that spent on luxury cars.
D) luxury cars cost a lot more than non-luxury cars.
Q2) Refer to Table 10-2.Suppose Keira's income increases from $18 to $23 but prices have not changed.What is her utility maximizing bundle now?
A) 6 cups of soup and 5 sandwiches
B) 4 cups of soup and 5 sandwiches
C) 5 cups of soup and 4 sandwiches
D) 5 cups of soup and 5 sandwiches
Q3) What is marginal utility and what is the law of diminishing marginal utility?
Q4) Each price-quantity combination on a consumer's demand curve shows the utility-maximizing quantity at the given price.
A)True
B)False
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Page 12
Chapter 11: Technology, production, and Costs
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Sample Questions
Q1) State the law of diminishing marginal returns.
Q2) Describe the relationship between marginal cost and average total cost.
Q3) The long-run average cost curve shows
A) the lowest average cost of producing every level of output in the long run.
B) where the most profitable level of output occurs.
C) the average cost of producing where diminishing returns are not present.
D) the plant size or scale that the firm should build.
Q4) Refer to Table 11-2.Alicia Gregory owns a foot massage business.She leases 4 computer-controlled massage booths,for which she pays $125 per day.She cannot increase the number machines she leases without giving the manufacturer 3 months notice.She can hire as many workers as she wants at a cost of $75 per day per worker.These are the only two inputs she uses in her business.Use this information to fill in the columns in the above table.
Q5) Consider a manufacturing operation that uses specialized machinery and labor to produce its output.In this case,the input that is not fixed in the short run is labor.
A)True
B)False
Q6) What is an isoquant? What is the slope of an isoquant?
Q7) In economics,what is the difference between the short run and the long run?
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Chapter 12: Firms in Perfectly Competitive Markets
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Sample Questions
Q1) Using two graphs,illustrate how a positive technological change in the market for notebook computers could eliminate short-run economic profit for a firm in that market.On the first graph,use a supply and demand graph to illustrate the positive technological change.On the second graph,use demand,ATC,MC and MR curves to illustrate the elimination of economic profit resulting from the positive technological change.Explain what is taking place in each graph.
Q2) Refer to Table 12-1.If the market price of each camera case is $8 and the firm maximizes profit,what is the amount of the firm's profit or loss?
A) $0 (it breaks even)
B) loss of $1,000
C) profit of $440
D) loss of $440
Q3) A firm's total profit can be calculated as all of the following except
A) total revenue minus total cost.
B) average profit per unit times quantity sold.
C) (price minus average total cost) times quantity sold.
D) marginal profit times quantity sold.
Q4) Under what conditions should a competitive firm shut down in the short run?
Q5) What is meant by the term "long-run competitive equilibrium?
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Chapter 13: Monopolistic Competition: The Competitive
Model in a More Realistic Setting
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Sample Questions
Q1) A firm that successfully differentiates its product or lowers its average cost of production creates
A) value for its customers.
B) entry barriers into its market.
C) a perfectly inelastic demand curve for its product.
D) economies of scale.
Q2) Refer to Table 13-2.What is the output (Q)that maximizes profit and what is the price (P)charged?
A) P=$55; Q=5 cases
B) P=$50; Q=6 cases
C) P=$45; Q=7 cases
D) P=$40; Q=8 cases
Q3) A monopolistically competitive firm that is earning profits will,in the long run,experience all of the following except
A) new rivals entering the market.
B) a decrease in demand for its product.
C) demand for the firm's product becomes more elastic.
D) a decrease in the number of rival products.
Q4) Explain the differences between total revenue,average revenue,and marginal revenue.
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Chapter 14: Oligopoly: Firms in Less Competitive Markets
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Sample Questions
Q1) What is meant by the term "government-imposed barrier to entry"? Why would a government be willing to impose barriers to entering an industry?
Q2) Monopolistic competition differs from oligopoly in that in monopolistic competition firms act independently while in oligopoly firms act interdependently.
A)True
B)False
Q3) In the 1930s and 1940s,the Technicolor company was able to leverage its bargaining power over the movie industry because Technicolor was the sole producer of cameras and films needed to produce color films.
A)True
B)False
Q4) OPEC periodically meets to agree to restrict the cartel's oil output,and yet almost every member of OPEC produces more than its own output quota.This suggests that OPEC has
A) a cooperative equilibrium.
B) a noncooperative equilibrium.
C) new potential entrants.
D) a threat of substitute goods.
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Chapter 15: Monopoly and Antitrust Policy
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Sample Questions
Q1) The first important federal law passed to regulate monopolies in the United States was the
A) Cellar-Kefauver Act.
B) Clayton Act.
C) Federal Trade Commission Act.
D) Sherman Act.
Q2) Refer to Table 15-1.What is the firm's profit-maximizing output and what is the price charged to sell this output?
A) P = $85; Q = 10
B) P = $80; Q = 11
C) P = $70; Q = 13
D) P = $65; Q = 14
Q3) A merger between the Ford Motor Company and General Motors would be an example of a
A) vertical merger.
B) horizontal merger.
C) conglomerate merger.
D) trust.
Q4) What happens to a monopoly's revenue when it sells more units of its product?
Q5) Explain why the monopolist has no supply curve?
Page 17
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Chapter 16: Pricing Strategy
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Sample Questions
Q1) The law of one price states that identical products should sell for the same price everywhere as long as transactions costs are zero.
A)True
B)False
Q2) Consider three pricing strategies that the firm can pursue: a.optimal two-part tariff pricing
B)perfect price discrimination
C)single-price monopoly pricing.
Of these three strategies,which is least likely to benefit society as a whole?
A) a two-part tariff pricing because consumers have to pay a fixed fee in addition to a per-unit price
B) perfect price discrimination because those willing to pay higher prices are forced to subsidize those who are not
C) Both perfect price discrimination and two-part tariff pricing do not benefit society because the entire consumer surplus is extracted by the producer.
D) single-price monopoly pricing because there are mutually beneficial trades (between consumers and seller) that are not exploited
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18
Chapter 17: The Markets for Labor and Other Factors of Production
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Sample Questions
Q1) What is personnel economics?
Q2) What is the signaling hypothesis of education?
Q3) If the market wage rate increases,a firm's labor demand curve does not shift but the labor supply curve shifts to the right.
A)True
B)False
Q4) In the United States,about ________ of the population is covered by private health insurance,most of which is provided by employers.
A) one-fourth
B) one-half
C) two-thirds
D) three-fourths
Q5) Refer to Table 17-2.What is the profit-maximizing quantity of labor that the firm should hire?
A) 5 units
B) 4 units
C) 3 units
D) 2 units
Q6) What is a compensating differential?
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Chapter 18: Public Choice, taxes, and the Distribution of Income
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Sample Questions
Q1) A personal exemption refers to
A) the tax rate that applies to a particular tax bracket.
B) the tax bracket that represents basic living expenses.
C) an amount representing basic living expenses that can be subtracted from income.
D) a dispensation that allows certain qualifying individuals not to pay federal taxes.
Q2) Refer to Table 18-8.
a.Draw a Lorenz curve for each country.
b.Which country has the more equal distribution of income?
c.Based on the Lorenz curve for the two countries,can you determine which country has the more progressive tax system? Explain your answer.
Q3) Refer to Table 18-4.Sasha is a single taxpayer with an income of $60,000.What is his marginal tax rate and what is his average tax rate?
A) marginal tax rate = 38%; average tax rate = 23%
B) marginal tax rate = 17%; average tax rate = 21%
C) marginal tax rate = 38%; average tax rate = 24%
D) marginal tax rate = 23%; average tax rate = 38%
Q4) What is the relationship between market failure and government failure?
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Chapter 19: GDP: Measuring Total Production and Income
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Sample Questions
Q1) Refer to Table 19-1.Suppose that a simple economy produces only four goods and services: sweatshirts,dental examinations,coffee drinks,and coffee beans.Assume all of the coffee beans are used in the production of the coffee drinks.Using the information in the above table,nominal GDP for this simple economy equals
A) 3,090 units.
B) $7,250.
C) $8,750.
D) $9,750.
Q2) The underground economy the informal sector can be a significant drag on the economies of developing countries.Why are firms in the informal sector often less efficient than firms in the formal sector?
Q3) If the value added of a firm is positive,will the firm necessarily have positive profits?
Q4) Residential investment includes spending by firms on office buildings.
A)True
B)False
Q5) Refer to Table 19-16.The table above represents hypothetical data from the National Income Accounts for 2011.Use the data to calculate personal income and disposable income.
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Chapter 20: Unemployment and Inflation
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Sample Questions
Q1) Efficiency wage is another name for the minimum wage.
A)True
B)False
Q2) The cost to firms of changing prices
A) is small even when there is rapid inflation.
B) is called a menu cost.
C) does not exist if inflation is perfectly anticipated.
D) all of the above
Q3) What are some reasons why the unemployment rate is typically lower in the United States as compared to Canada and some Western European countries?
Q4) The nominal interest rate plus the inflation rate equals the real interest rate.
A)True
B)False
Q5) A consumer price index of 160 in 1996 with a base year of 1982-1984 would mean that the cost of the market basket
A) equaled $160 in 1996.
B) equaled $160 in 1983.
C) rose 160% from the cost of the market basket in the base year.
D) rose 60% from the cost of the market basket in the base year.
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Chapter 21: Economic Growth, the Financial System, and Business Cycles
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Sample Questions
Q1) Since 1900,real GDP in the United States has grown
A) more rapidly than the population.
B) more slowly than the population.
C) as rapidly as the population.
D) in a random unpredictable manner relative to the population.
Q2) Botswana's rapid growth can be explained by
A) protection of private property and avoiding political instability.
B) investment in human capital from 1960 through 2009.
C) the movement of workers from the agricultural sector to the manufacturing sector.
D) an increase in labor force participation.
Q3) When potential GDP increases,is it necessarily the case that real GDP increases as well? Explain.
Q4) During the recession phase of the business cycle,
A) production is usually rising.
B) interest rates are usually falling.
C) unemployment is usually falling.
D) income is usually rising.
Q5) How are unemployment,inflation,and the business cycle related?
Page 23
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Chapter 22: Long-Run Economic Growth: Sources and Policies
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Q1) The period of time from 1,000,000 B.C.to 1300 A.D.was a period of
A) no sustained economic growth.
B) slow and steady economic growth.
C) moderate economic growth.
D) rapid and sustained economic growth.
Q2) Foreign direct investment declined worldwide during the recession of 2007-2009.The decline in foreign direct investment in developing countries can make it more difficult for these countries to break out of the vicious cycle of low economic growth and A) overpopulation.
B) low saving and investment.
C) a low import/export ratio.
D) low government spending.
Q3) A policy that offers parents a tax reduction based on how much they are saving for their children's college education should ________ the equilibrium level of loanable funds and ________ the rate of long-term growth.
A) decrease; increase
B) increase; decrease
C) decrease; decrease
D) increase; increase
Page 24
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Chapter 23: Aggregate Expenditure and Output in the Short Run
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Q1) In the aggregate expenditure model,________ has both an autonomous component and an induced component.
A) planned investment spending
B) consumption spending
C) government spending
D) net export spending
Q2) Housing wealth is equal to
A) the market value of a house minus the value of loans people have taken out to pay for the house.
B) the actual price paid for a house minus the current value of the house.
C) the actual price paid for a house minus the value of any outstanding loans taken out to pay for the house.
D) the current market value of the house should that house be sold within the next 30 days.
Q3) Why do economists care about aggregate expenditures?
Q4) Aggregate expenditure includes consumption spending,unplanned investment spending,government purchases,and net exports.
A)True
B)False
25
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Chapter 24: Aggregate Demand and Aggregate Supply Analysis
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Q1) A negative supply shock in the short run causes
A) the aggregate supply curve to shift to the left.
B) the price level to fall.
C) unemployment to fall.
D) equilibrium real GDP to rise.
Q2) The long-run aggregate supply curve is vertical.
A)True
B)False
Q3) Which aggregate supply curve has a positive slope?
A) long run only
B) short run only
C) both long run and short run
D) neither long run nor short run
Q4) Suppose the economy is at full employment and firms become more optimistic about the future profitability of new investment.Which of the following will happen in the short run?
A) Output will decline.
B) Prices will decline.
C) Unemployment will decline.
D) The aggregate demand curve will shift to the left.
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Chapter 25: Money, banks, and the Federal Reserve System
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Q1) If the required reserve ratio is 10 percent,an increase in bank reserves of $1,000 can support an increase in checking account deposits (including the original deposit)in the banking system as a whole of up to
A) $100.
B) $1,000.
C) $10,000.
D) $100,000.
Q2) Soldiers in a World War II prisoner-of-war camp
A) used gold as a fiat money.
B) used cowrie shells as money.
C) used cigarettes as money.
D) used U.S. dollars as a commodity money.
Q3) If a person withdraws $500 from his/her checking account and holds it as currency,then M1 will ________ and M2 will ________.
A) increase; decrease
B) not change; not change
C) not change; increase
D) decrease; increase
E) decrease: decrease
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Chapter 26: Monetary Policy
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Q1) Toll Brothers,a residential home builder,did well during the recession in 2001 but did not do so well in 2007 after the housing bubble burst.The reason for this is
A) the Fed lowered interest rates in 2001 but raised interest rates in 2007 to help fight inflation.
B) the Fed lowered interest rates in 2001 but did not believe that cutting the interest rate in 2007 would be enough to revive the housing market.
C) the Fed raised interest rates in 2001 but did not believe that cutting the interest rate in 2007 would be enough to revive the housing market.
D) the Fed raised interest rates in 2001 but lowered interest rates in 2007 to revive the housing market.
E) the Fed raised interest rates in 2001 and raised interest rates in 2007 to help fight inflation.
Q2) One of the monetary policy goals of the Federal Reserve is price stability. A)True
B)False
Q3) What actions should the Fed take if it believes the economy is about to fall into recession?
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Chapter 27: Fiscal Policy
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Q1) A recession tends to cause the federal budget deficit to ________ because tax revenues ________ and government spending on transfer payments ________.
A) increase; rise; falls
B) increase; fall; rises
C) decrease; rise; falls
D) decrease; fall; rises
Q2) If Congress passed a one-time tax cut in order to stimulate the economy in 2010,and tax rate levels returned to their pre-2010 level in 2011,how should this tax cut affect the economy?
A) Households on average would save an amount equal to the tax cut.
B) The tax cut would stimulate spending by households.
C) The tax cut would shift the aggregate demand curve to the right.
D) The tax cut would raise the price level in 2010.
Q3) Does expansionary fiscal policy directly increase the money supply? Isn't it true that the president and Congress fight recessions by spending more money?
Q4) Why would a higher tax rate lower the government purchases multiplier? What does the tax rate have to do with the government purchases multiplier?
Q5) What is expansionary fiscal policy? What is contractionary fiscal policy?
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Chapter 28: Inflation, unemployment, and Federal Reserve Policy
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Q1) The major criticism of real business cycle models is
A) negative technology shocks are uncommon and can't explain all business cycle fluctuations.
B) positive technology shocks actually push real GDP above the economy's potential GDP.
C) negative technology shocks actually push real GDP below the economy's potential GDP
D) this model relies too heavily on monetary explanations for fluctuations in real GDP.
Q2) Refer to Figure 28-1.Suppose that the economy is currently at point A on the short-run Phillips curve in the figure above,and the unemployment rate at A is the natural rate.If the economy was to move to point C,which of the following must be true?
A) The economy is producing a level of GDP equal to potential GDP.
B) Aggregate demand must have decreased.
C) Equilibrium GDP at point C must be above potential GDP.
D) The Fed conducted contractionary policy to cause the move.
E) The Fed sold treasury bills to cause the move.
Q3) When will an increase in aggregate demand not result in lower unemployment rates in the short run?
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Chapter 29: Macroeconomics in an Open Economy
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Q1) An increase in U.S.federal government budget deficits that raises U.S.interest rates relative to the rest of the world should
A) raise the trade balance.
B) increase net exports.
C) cause the dollar to depreciate.
D) lead to a current account deficit.
E) decrease foreign portfolio investment.
Q2) What's the difference between the nominal exchange rate and the real exchange rate?
Q3) You're traveling in Ireland and are thinking about buying a new digital camera.You've decided you'd be willing to pay $125 for a new camera,but cameras in Ireland are all priced in euros.If the exchange rate is 0.85 euros per dollar,what's the highest price in euros you'd be willing to pay for a camera?
A) 105 euros
B) 106.25 euros
C) 110.15 euros
D) 147 euros
Q4) Explain the relationship between net exports and net foreign investment.
Q5) Why is the balance of payments always zero?
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Chapter 30: The International Financial System
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Q1) If one U.S.dollar could be exchanged for one Canadian dollar in 1970,and one U.S.dollar can now be exchanged for 1.13 Canadian dollars,which of the following is true?
A) The U.S. dollar lost value against the Canadian dollar.
B) The Canadian dollar lost value against the U.S. dollar.
C) The Canadian dollar gained value against the U.S. dollar.
D) Both A and C are true.
Q2) Because the value of the euro is determined by factors that affect the entire euro zone,during the recession of 2007-2009,individual countries using the euro
A) were unable to have their exchange rates depreciate.
B) were more insulated from unemployment increases than most countries.
C) experienced a greater increase in exports than did most countries.
D) were able to use expansionary monetary policy to lessen the impact of the recession.
Q3) How were exchange rates determined under the gold standard? How did the Bretton Woods system differ from the gold standard?
Q4) Why are foreign investors more likely to invest in U.S.government bonds than in U.S.corporate stocks and bonds?
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