Economics for Business Final Exam
Course Introduction
Economics for Business introduces students to the fundamental principles of microeconomics and macroeconomics with a focus on their application to business decision-making. The course covers topics such as supply and demand, market structures, pricing strategies, consumer behavior, production costs, and the impact of government policies on businesses. Students will learn how economic theories inform real-world business strategies and operations, and will develop analytical skills to evaluate market trends, optimize resource allocation, and respond to economic challenges in a dynamic business environment.
Recommended Textbook
Economics 5th Edition by R. Glenn Hubbard
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Page 2
Chapter 1: Economics: Foundations and Models
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Q1) In economics, tangible merchandise is referred to as A) invention.
B) human capital.
C) services.
D) goods.
Answer: D
Q2) What is meant by the statement that "optimal decisions are made at the margin"?
Answer: In economics, the word "marginal" means "extra" or "additional." Economists reason that the optimal decision is to continue any activity up to the point where the marginal benefit equals the marginal cost, so optimal decisions are made at the point where the extra benefit received from an activity is equal to the extra cost associated with that activity.
Q3) List the five main factors of production.
Answer: The five main factors of production are labor, capital, human capital, natural resources, and entrepreneurial ability.
Q4) What is the difference between goods and services?
Answer: Goods are tangible merchandise such as cell phones or automobiles. Services are activities done for others, such as providing medical care or legal advice.
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Chapter 2: Trade-Offs, Comparative Advantage, and the Market System
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Q1) Refer to Table 2-15. What is George's opportunity cost of cultivating a garden?
A) half a garden cultivated
B) two lawns mowed
C) two-thirds of a garden cultivated
D) one and a half lawns mowed
Answer: B
Q2) In the circular flow model, households demand resources such as labor services in the product market.
A)True
B)False
Answer: False
Q3) 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
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Chapter 3: Where Prices Come From: the Interaction of
Demand and Supply
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Q1) What are the two effects that explain the Law of Demand? Briefly explain each effect.
Answer: The two effects that explain the Law of Demand are the income effect and the substitution effect. The income effect is the change in quantity demanded of a good that results from a change in purchasing power due to a change in the good's price. The substitution effect is the change in quantity demanded of a good that results from the effect of a change in the good's price making the good more or less expensive relative to other goods that are substitutes.
Q2) Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for rice. What happens in this market if buyers expect the price of rice to fall?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
Answer: D
Q3) What are the five most important variables that shift the market supply curve?
Answer: Prices of inputs; Technological change; Prices of substitutes in production; The number of firms in the market; Expected future prices
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Chapter 4: Economic Efficiency, Government Price Setting, and Taxes
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Sample Questions
Q1) Refer to Figure 4-1. If the market price is $1.00, what is Arnold's consumer surplus?
A) $1.00
B) $2.00
C) $6.00
D) $7.00
Q2) Refer to Figure 4-4. What is the value of consumer surplus at the equilibrium price of $15?
A) $60
B) $120
C) $180
D) $240
Q3) Refer to Figure 4-8. Suppose that instead of a rent ceiling, the government imposed a price floor of $2,000 per month for apartments. What is the value of consumer surplus after the imposition of the price floor?
A) $6,000
B) $30,000
C) $100,000
D) $240,000
Q4) What is "tax incidence"? What determines tax incidence in a competitive market?
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Chapter 5: Externalities, Environmental Policy, and Public Goods
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Q1) Refer to Figure 5-5. If, because of an externality, the economically efficient output is Q2 and not the current equilibrium output of Q1, what does D2 represent?
A) the demand curve reflecting external benefits
B) the demand curve reflecting social benefits
C) the demand curve reflecting private benefits
D) the demand curve reflecting the sum of social and external benefits
Q2) Refer to Figure 5-4. What is the economically efficient output level?
A) Q1
B) Q2 minus Q1
C) Q2
D) Q1 plus Q2
Q3) Haiti was once a heavily forested country. Today, 80 percent of Haiti's forests have been cut down, primarily to be burned to create charcoal. The reduction in the number of trees has led to devastating floods when it rains heavily. This is an example of A) tragic externalities.
B) the tragedy of the commons.
C) human greed.
D) the consequences of not having a market economic system.
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Chapter 6: Elasticity: the Responsiveness of Demand and Supply
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Q1) A linear downward-sloping demand curve has price elasticities (in absolute values) that
A) increase as price decreases.
B) remain constant along the demand curve.
C) decrease as price decreases.
D) are greater than or equal to 1.
Q2) If a firm wanted to know whether the demand for its product was elastic, unit-elastic, or inelastic, then the firm could
A) survey competitors and ask them what they think demand elasticity is for the product. B) talk to its customers.
C) change price a little bit and observe what happens to total revenue.
D) not do anything, as there is no way to find an elasticity value.
Q3) Suppose the price elasticity of demand for cigarettes is -0.4. The FDA decides to regulate tobacco production, which increases the price of cigarettes and causes the quantity of cigarettes demanded to decrease by 25 percent. What is the percentage increase in price which would lead to the 25 percent decrease in quantity demanded? If the price elasticity was -4, what would be the percentage increase in price?
Q4) Briefly explain the economic concept of elasticity.
Page 8
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Chapter 7: The Economics of Health Care
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Q1) Suppose you see a 2008 Ford Mustang GT advertised in the local newspaper for $15,000. If you knew the car was reliable, you would be willing to pay $17,000 for it. If you knew the car was unreliable, you would only be willing to pay $12,000 for it. Under what circumstances should you buy the car?
Q2) The health care system in the United Kingdom is referred to as ________, under which the government owns most of the hospitals and employs most of the doctors.
A) an out-of-pocket system
B) a single-payer health care system
C) a universal health insurance system
D) socialized medicine
Q3) Health insurance markets have a problem with insuring people who are "poor health risks" while many people who are "good health risks" do not buy insurance. This problem is an example of A) moral hazard. B) adverse selection. C) market signaling. D) asymmetric information.
Q4) What is adverse selection?
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Page 9
Chapter 8: Firms, the Stock Market, and Corporate Governance
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Sample Questions
Q1) The Sarbanes-Oxley Act of 2002 requires that each member of the board of directors personally certify the accuracy of financial reports.
A)True
B)False
Q2) Which of the following is a characteristic of a bond?
A) A bond represents a promise to repay a fixed amount of funds.
B) The face value or principal plus interest is repaid at a specified period of time.
C) The length of coupon payments is fixed by the stated maturity period.
D) All of these are characteristics of bonds.
Q3) Laura's Pizza Place incurs $800,000 per year in explicit costs and $100,000 in implicit costs. The restaurant earns $1.3 million in revenues and has $5 million in net worth. Based on this information, what is economic profit for Laura's Pizza Place?
A) $200,000
B) $400,000
C) $500,000
D) $2.8 million
Q4) What is the difference between explicit and implicit costs?
Q5) How can a sole proprietorship raise funds needed for firm expansion?
Page 10
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Chapter 9: Comparative Advantage and the Gains From International Trade
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Q1) Governments sometimes erect barriers to trade other than tariffs and quotas. Which of the following is not an example of this type of trade barrier?
A) a requirement that the employees of domestic firms that engage in foreign trade pay income taxes
B) a requirement that imports meet health and safety requirements
C) restrictions on imports for national security reasons
D) a requirement that the U.S. government buy military uniforms only from U.S. manufacturers
Q2) Refer to Figure 9-4. Suppose the government allows imports of leather footwear into the United States. The market price falls to $24. What area represents domestic producer surplus?
A) T + U
B) V
C) V + W + X + Y
D) W + X + Y
Q3) Selling a product at a price below its cost is known as dumping.
A)True
B)False
Q4) What is a tariff?
11
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Chapter 10: Consumer Choice and Behavioral Economics
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Q1) What is the endowment effect?
A) the phenomenon that economic agents are endowed with different qualities and abilities so that trade among individuals increase efficiency
B) the tendency for economic agents with abundant resources to consume a proportionately greater quantity of goods and services
C) the tendency of people to be unwilling to sell something they already own even if they are offered a price that is greater than the price they would be willing to pay to buy the good if they didn't already own it.
D) the tendency of firms to use celebrities endowed with good looks to promote their products
Q2) If by purchasing more apples and fewer oranges you increase your total utility, then apples must be cheaper than oranges.
A)True
B)False
Q3) The income effect of a price increase for a Giffen good outweighs the substitution effect.
A)True
B)False
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Chapter 11: Technology, Production, and Costs
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Q1) Refer to Figure 11-15. Suppose Hilda produces 100 gooseberry pies. What is the marginal rate of technical substitution of labor for capital when labor is increased from 10 to 20 hours?
A) 1 unit of capital
B) 10 units of capital
C) 14 units of capital
D) 24 units of capital
Q2) If four workers can produce 18 chairs a day and five can produce 20 chairs a day, the marginal product of the fifth worker is
A) 2 chairs.
B) 3 chairs.
C) 4 chairs.
D) 38 chairs.
Q3) If, when a firm doubles all its inputs, its average cost of production increases, then production displays
A) diminishing returns.
B) economies of scale.
C) diseconomies of scale.
D) declining fixed costs.
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Page 13
Chapter 12: Firms in Perfectly Competitive Markets
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Q1) A perfectly competitive firm earns a profit when price is
A) equal to minimum average total cost.
B) above minimum average total cost.
C) equal to minimum average variable cost.
D) equal to minimum average fixed cost.
Q2) Refer to Figure 12-4. If the market price is $30 and if the firm is producing output, what is the amount of its total variable cost?
A) $7,200
B) $6,480
C) $5,400
D) $3,960
Q3) Refer to Figure 12-10. The firm's short-run supply curve is its A) marginal cost curve.
B) marginal cost curve from b and above.
C) marginal cost curve from c and above.
D) marginal cost curve from d and above.
Q4) Why are individual buyers and sellers in perfect competition called price takers?
Q5) What is the difference between "shutting down temporarily" and "exiting the industry"?
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Chapter 13: Monopolistic Competition: the Competitive
Model in a More Realistic Setting
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Q1) Refer to Figure 13-13. If the diagram represents a typical firm in the market, what is likely to happen to its average cost of production in the long run?
A) It will probably fall since the firm must be cost efficient to remain competitive.
B) It will probably fall since the firm will be selling less than its current amount.
C) It will probably rise since the firm will be producing less than its current amount.
D) It will probably rise since its long-run demand is likely to be higher.
Q2) When a monopolistically competitive firm breaks even in the long run, this is equivalent to earning a zero accounting profit.
A)True
B)False
Q3) Both the perfectly competitive firm and the monopolistically competitive firm produce at the output where marginal revenue equals marginal cost (MR = MC) but only the perfectly competitive firm achieves allocative efficiency. Explain why this is the case.
Q4) What is meant by "excess capacity"? How does it relate to consumer utility?
Q5) What is the difference between zero accounting profit and zero economic profit?
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Page 15
Chapter 14: Oligopoly: Firms in Less Competitive Markets
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Q1) Refer to Table 14-3. Is there a dominant strategy for Nigeria and, if so, what is it?
A) Yes, it has a dominant strategy depending on what Saudi Arabia does.
B) No, there is no dominant strategy.
C) Yes, the dominant strategy is to produce a low output.
D) Yes, the dominant strategy is to produce a high output.
Q2) Refer to Table 14-9. Saudi Arabia and Yemen must decide how much oil to produce. Since the demand for oil is inelastic, relatively low production rates drive up prices and profits. Saudi Arabia, the world's largest and lowest cost producer, is able to influence market price; it has an incentive to keep output low. Yemen, on the other hand, is a relatively high cost producer with much smaller reserves. Use the payoff matrix in Table 14-9 to answer the following questions.
a. What is the dominant strategy for Saudi Arabia?
b. What is the dominant strategy for Yemen?
c. What is the Nash equilibrium?
Q3) Firms in an oligopoly are said to be interdependent. What does this mean?
Q4) Why do economists refer to the pricing strategies of oligopoly firms as a prisoner's dilemma game?
Q5) What is the difference between explicit collusion and implicit collusion?
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Chapter 15: Monopoly and Antitrust Policy
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Q1) Refer to Table 15-2. What is the profit-maximizing quantity and price for the monopolist?
A) Quantity = 8 cases, Price = $9
B) Quantity = 7 cases, Price = $10
C) Quantity = 9 cases, Price = $8
D) Quantity = 10 cases, Price = $7
Q2) Refer to the Article Summary. A merger between two competitors such as American Airlines and US Airways may ultimately be approved by the Department of Justice and the FTC if the two companies can substantiate ________ as a result of the merger.
A) increases in revenue for the merged company
B) an increase in the HHI to over 1,800
C) decreases in marginal revenue for the merged company
D) increases in economic efficiency
Q3) 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
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Chapter 16: Pricing Strategy
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Q1) Assuming zero transaction cost, if your local grocer buys oranges at a low price from an orchard and resells them to you at a higher price, then the grocer's revenue minus costs is known as
A) arbitrage profits.
B) transactions profits.
C) pure profits.
D) excess profits.
Q2) Consumers who will pay high prices to be among the first to own certain new products are called
A) savvy consumers.
B) naive consumers.
C) gullible.
D) early adopters.
Q3) If a firm knew every consumer's willingness to pay and could prevent arbitrage, it could charge every consumer a different price. This practice is known as
A) first-degree exploitation, or perfect price discrimination.
B) maximization of producer surplus, or perfect price discrimination.
C) first-degree price discrimination, or perfect price discrimination.
D) first-degree transfer of consumer surplus, or perfect price discrimination.
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Page 18
Chapter 17: The Markets for Labor and Other Factors of Production
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Q1) The price of a factor of production that is in fixed supply is called
A) economic rent.
B) economic profit.
C) a compensating differential.
D) opportunity cost.
Q2) A decrease in the amount of human capital acquired by workers will lead to decrease in the supply of labor.
A)True
B)False
Q3) Which of the following factors will not cause the labor demand curve to shift?
A) increases in human capital
B) changes in technology
C) change in the price of the product produced with labor
D) the wage rate
Q4) A decrease in the wage rate causes
A) an increase in the quantity of labor demanded.
B) a rightward shift of the firm's labor demand curve.
C) a leftward shift of the firm's labor demand curve.
D) a decrease in labor's productivity.
Q5) Why are there superstar baseball players but no superstar chiropractors?
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Chapter 18: Public Choice, Taxes, and the Distribution of Income
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Q1) Refer to the Article Summary. Suppose the sale of marijuana is legalized in Florida, and the state decides to charge a tax of $50 per ounce on each sale, with the state claiming that retailers will bear the entire burden of this tax. Draw a graph illustrating the situation where retail outlets would bear the entire tax burden of $50 per ounce of marijuana. Explain what would need to be true about the demand for marijuana for retailers to bear the entire burden of this tax, and if this would likely occur if marijuana sales were legalized.
Q2) The actual division of a tax between buyers and sellers in a market is the excess burden of the tax.
A)True
B)False
Q3) Refer to Table 18-12.
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.
Q4) Is a typical person likely to gather more information when buying a new computer or when voting for a member of the U.S. Senate? Why?
Page 20
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Chapter 19: GDP: Measuring Total Production and Income
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Q1) The measure of production that values output using base-year prices is called A) real GDP.
B) nominal GDP.
C) value-added GDP.
D) underground GDP.
Q2) In calculating gross domestic product, the Bureau of Economic Analysis uses the sum of the market value of final goods and services produced. This means that the BEA A) simply counts the total number of goods produced in the market place and then adds them up.
B) values goods at their market prices, multiplies them by the quantity produced, and then adds them up.
C) simply counts the total number of goods and services produced in the marketplace and then adds them up.
D) values goods and services at their market prices, multiplies them by the quantity produced, and then adds them up.
Q3) Refer to Table 19-25. Given the following information, calculate the rate of increase in the price level from 2012 to 2013. Use the percent change in the GDP deflator.
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Chapter 20: Unemployment and Inflation
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Q1) If cyclical unemployment is eliminated in the economy, then
A) the economy is considered to be at full employment.
B) the unemployment rate is below the natural rate of unemployment.
C) the unemployment rate is above the natural rate of unemployment.
D) the economy is at less than full employment.
Q2) You borrow $10,000 from a bank for one year at a nominal interest rate of 5%. The CPI over that year rises from 180 to 200. What is the real interest rate you are paying?
A) 15%
B) 5%
C) -1.1%
D) -6.1%
Q3) Which of the following describes actual trends in the U.S. labor force participation rate?
A) The labor force participation rate of adult men has risen since 1950.
B) The labor force participation rate of adult women has fallen since 1950.
C) The labor force participation rate of adult men not in school, but too young to retire has risen since 1950.
D) The labor force participation rate of adult women has risen since 1950.
E) The labor force participation rate of all adults has fallen since 1950.
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Chapter 21: Economic Growth, the Financial System, and Business Cycles
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Q1) If an economy is growing at a rate of 2.5% per year, how long will it take the economy to double in size?
A) 60 years
B) 43 years
C) 36 years
D) 28 years
Q2) The demand for loanable funds has a ________ slope because the lower the interest rate, the ________ number of investment projects are profitable, and the ________ the quantity of loanable funds demanded.
A) negative; greater; greater
B) negative; greater; lesser
C) negative; lesser; greater
D) positive; lesser; lesser
Q3) As the economy nears the end of a recession, which of the following do we typically see?
A) further decreases in consumer spending
B) increased spending on capital goods by firms
C) increasing interest rates
D) all of the above
Q4) How are unemployment, inflation, and the business cycle related?
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Chapter 22: Long-Run Economic Growth: Sources and Policies
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Q1) The economic growth model predicts that ________ across countries will converge over time.
A) income levels
B) GDP per capita
C) foreign direct investment rates
D) growth rates
Q2) Paul Romer, an economist at Stanford University, is most closely associated with what economic theory?
A) new growth theory
B) labor productivity theory
C) the process of creative destruction
D) the Communist Manifesto
Q3) Refer to the Article Summary. If, after the outflow of workers in Poland, it now takes more capital per hour worked to get the same amount of GDP per hour worked, this indicates ________ the per-worker production function in Poland.
A) a movement up
B) a movement down
C) an upward shift of
D) a downward shift of
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Chapter 23: Aggregate Expenditure and Output in the Short Run
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Q1) An increase in the price level in the United States will reduce exports and increase imports.
A)True
B)False
Q2) Assume that inventories declined by more than analysts predicted. This implies that A) planned aggregate expenditure was greater than real GDP.
B) planned aggregate expenditure was equal to real GDP.
C) planned aggregate expenditure was less than real GDP.
D) planned aggregate expenditure is unrelated to real GDP.
Q3) If aggregate expenditure is less than GDP, then inventories rise and GDP falls.
A)True
B)False
Q4) If aggregate expenditure is more than GDP, then inventories fall and GDP rises. A)True
B)False
Q5) Use a 45-degree diagram to illustrate macroeconomic equilibrium. Make sure your diagram shows the aggregate expenditure function. Include in your diagram a point where aggregate expenditure is greater than GDP and a point where aggregate expenditure is less than GDP.
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Chapter 24: Aggregate Demand and Aggregate Supply Analysis
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Q1) Which of the following models relies on emphasizing the importance of sticky wages and prices?
A) the monetarist model
B) the new classical model
C) the real business cycle model
D) the new Keynesian model
Q2) Potential GDP is also referred to as
A) realized GDP.
B) full-employment GDP.
C) politico-economic GDP.
D) balanced-budget GDP.
Q3) During the recession of 2007-2009 in the United States, ________ relative to potential GDP.
A) business fixed investment spending rose and net export spending declined
B) consumption spending rose and residential construction spending declined
C) federal government purchases rose and changes in business inventories declined
D) net export spending rose and consumption spending declined
Q4) Using an aggregate demand graph, illustrate the impact of an increase in the price level on aggregate demand.
Chapter 25: Money, Banks, and the Federal Reserve System
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Q1) People hold money as opposed to financial assets because money
A) earns interest.
B) is perfectly liquid.
C) earns no interest.
D) earns a higher return than other financial assets.
Q2) During World War II, prisoners of war used ________ as money.
A) bullets
B) cowrie shells
C) chocolate
D) cigarettes
Q3) As was demonstrated in 2007, firms in the shadow banking system
A) were very vulnerable to bank runs.
B) were protected from financial ruin by federal deposit insurance.
C) were well insulated from bank runs.
D) were more insulated from the financial crisis than were commercial banks.
Q4) There is a strong link between changes in the money supply and inflation
A) in both the short run and the long run.
B) in neither the short run nor the long run.
C) in the short run, but not in the long run.
D) in the long run, but not in the short run.
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Chapter 26: Monetary Policy
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Q1) An advantage of the personal consumption expenditures price index (PCE) over the Consumer Price Index (CPI) as a measure of inflation is that the PCE
A) is a more narrow, focused measure of inflation.
B) is a chain-type price index that allows the mix of products to change each year.
C) includes the prices of industrial equipment.
D) includes the prices of goods, but not services.
Q2) Hovnanain Enterprises, a residential home builder based in New Jersey, did well during the mid-2000s but did not do so well in during and immediately after the recession of 2007-2009. The reason for this is
A) the Fed kept low interest rates in the mid-2000s but raised interest rates in 2007 to help fight inflation.
B) the Fed kept low interest rates in the mid-2000s but by 2007 the housing bubble had burst.
C) the Fed raised interest rates in the mid-2000s but lowered interest rates in 2007 to revive the housing market.
D) the Fed raised interest rates in the mid-2000s and raised interest rates in 2007 to help fight inflation.
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Chapter 27: Fiscal Policy
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Sample Questions
Q1) An increase in the money supply is a discretionary fiscal policy which will increase aggregate demand.
A)True
B)False
Q2) An increase in government spending increases the supply of money in our economy.
A)True
B)False
Q3) Federal government purchases, as a percentage of GDP,
A) have risen since the early 1950s.
B) have fallen since the early 1950s.
C) have remained roughly the same since the early 1950s.
D) rose from the early 1950s until the mid-1980s, and then fell.
Q4) Assume a country is required by law to balance the budget every year. Suppose aggregate demand falls, causing a recession and a budget deficit. To balance the budget, what would the government need to do with the level of government spending and taxes? How would these changes in government spending and taxes affect aggregate demand and the economy?
Q5) President Bush lowered taxes on capital gains and dividends in 2003. Explain how this might increase aggregate supply.
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Chapter 28: Inflation, Unemployment, and Federal Reserve Policy
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Sample Questions
Q1) If the Phillips curve represents a "structural relationship," then
A) the trade-off between unemployment and inflation is permanent.
B) the trade-off between unemployment and inflation holds only for the short run.
C) the trade-off between unemployment and inflation holds in the long run, but not in the short run.
D) the Phillips curve will be vertical in the long run.
Q2) Monetary policy can
A) shift the short-run trade-off between inflation and unemployment if it affects expected inflation.
B) shift the long-run trade-off between inflation and unemployment through changes in cyclical unemployment.
C) shift neither the short-run nor long-run Phillips curve trade-offs between inflation and unemployment.
D) shift both the short-run and long-run trade-offs between inflation and unemployment if changes in policy are credible.
Q3) If firms and workers have adaptive expectations, what impact will expansionary monetary policy have on inflation, unemployment, and the Phillips curve?
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Page 30
Chapter 29: Macroeconomics in an Open Economy
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Sample Questions
Q1) Net foreign investment minus net foreign portfolio investment is equal to A) capital outflows.
B) net foreign financial investment.
C) the balance of trade.
D) net foreign direct investment.
Q2) Between 2007 and 2011 the value of the U.S. dollar fell by more than 60 percent against the Japanese yen. This fall in the price of the dollar against the yen was ________ for Japanese companies that exported to the United States and ________ for U.S. companies that exported to Japan.
A) good; good
B) bad; good
C) good; bad
D) bad; bad
Q3) Why is the balance of payments always zero?
Q4) Holding all else constant, an economic expansion in Mexico should decrease the demand for U.S. dollars.
A)True
B)False
Q5) What is the difference between net exports and the current account balance?
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Q6) Explain the relationship between net exports and net foreign investment.
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Chapter 30: The International Financial System
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Q1) Foreign portfolio investment in the United States has continually declined since 1995.
A)True
B)False
Q2) Under the Bretton Woods exchange rate system, ________ could sell their dollars to the American government in exchange for gold.
A) foreign central banks
B) American citizens
C) foreign citizens
D) all of the above
Q3) In order to reduce or eliminate a chronic shortage in the market for a currency under a fixed exchange rate system, we must devalue the currency.
A)True
B)False
Q4) Briefly describe how the Bretton Woods system operated.
Q5) If the equilibrium exchange rate exceeds the par exchange rate in the market for pounds, the pound is overvalued.
A)True
B)False
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