Introduction to Microeconomics
Exam Answer Key
Course Introduction
Introduction to Microeconomics provides students with a foundational understanding of the principles governing individual and firm decision-making in markets. This course explores the concepts of supply and demand, market equilibrium, elasticity, consumer behavior, production and costs, and the various structures of market competition, such as perfect competition, monopoly, and oligopoly. Emphasis is placed on real-world applications, the role of government in the economy, and the analysis of market outcomes to develop critical thinking and economic reasoning skills.
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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Sample Questions
Q1) If the price of milk was $2.50 a gallon and it is now $3.25 a gallon, what is the percentage change in price?
A) 13 percent
B) 30 percent
C) 75 percent
D) 77 percent
Answer: B
Q2) List the five main factors of production.
Answer: The five main factors of production are labor, capital, human capital, natural resources, and entrepreneurial ability.
Q3) What is an economic variable?
Answer: An economic variable is something measurable that can have different values, such as the wages of software programmers.
Q4) When voluntary exchange takes place, both parties gain from the exchange.
A)True
B)False
Answer: True
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Chapter 2: Trade-Offs, Comparative Advantage, and the Market System
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Q1) The idea underlying Adam Smith's "invisible hand" is that people tend to behave in ways that go unnoticed in society.
A)True
B)False
Answer: False
Q2) The production possibilities frontier model assumes all of the following except
A) labor, capital, land and natural resources are fixed in quantity.
B) the economy produces only two products.
C) any level of the two products that the economy produces is currently possible.
D) the level of technology is fixed and unchanging.
Answer: C
Q3) The opportunity cost of taking a semester-long economics class is
A) the cost of tuition and fees only.
B) the value of the time spent in the classroom.
C) zero because there is no admission charged if you are enrolled in the course.
D) equal to the highest value of an alternative use of the time and money spent on the class.
E) the knowledge and enjoyment you receive from attending the class.
Answer: D
Page 4
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Chapter 3: Where Prices Come From: the Interaction of
Demand and Supply
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Q1) If the demand for a product decreases and the supply of the same product decreases, the equilibrium price will decrease.
A)True
B)False
Answer: False
Q2) Elvira decreased her consumption of bananas when the price of peanut butter increased. For Elvira, peanut butter and bananas are
A) substitutes in consumption.
B) both inferior goods.
C) complements in consumption.
D) both luxury goods.
Answer: C
Q3) When the price of a good falls, consumers buy a larger quantity because of the ________ effect and the ________ effect.
A) substitution; income
B) normal; inferior
C) substitute; complement
D) supply; demand
Answer: A
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Chapter 4: Economic Efficiency, Government Price Setting, and Taxes
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Sample Questions
Q1) Which of the following is a consequence of minimum wage laws?
A) Low skilled workers benefit because minimum wage increases the number of jobs providing low skilled workers with training.
B) Employers will be reluctant to offer low-skill workers jobs with training.
C) Producers have an incentive to offer workers non-wage benefits such as health care benefits and convenient working hours rather than a higher wage.
D) All workers benefit when the minimum wage is increased.
Q2) Refer to Figure 4-7. The figure above represents the market for iced tea. Assume that this is a competitive market. If the price of iced tea is $3,
A) the quantity supplied is greater than the economically efficient quantity.
B) the quantity demanded is economically efficient but the quantity supplied is economically inefficient.
C) economic surplus is maximized.
D) too many consumers want to buy iced tea.
Q3) What is "tax incidence"? What determines tax incidence in a competitive market?
Q4) What do economists mean by an efficient tax?
Q5) Will equilibrium in a market always result in an outcome that is economically efficient? Explain.
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Chapter 5: Externalities, Environmental Policy, and Public Goods
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Q1) Negative externalities and the tragedy of the commons are problems that have a common source. What is this common source?
A) self-interest motives of producers and consumers
B) a lack of concern for human rights
C) a lack of competition
D) a lack of clearly defined and enforced property rights
Q2) Which of the following is an example of a common resource?
A) catfish in a private pond in Mississippi
B) impounded dogs in a dog pound
C) public health care services in the United States
D) sea otters in the coastal waters of the Pacific Ocean
Q3) Refer to Figure 5-8. Suppose the emissions reduction target is currently established at 8 million tons. Should society undertake to reduce an additional 1 million tons so that the total reduction is 9 million tons?
A) No, because there is a net cost represented by the area B + C.
B) Yes, because the marginal benefit exceeds the marginal costs.
C) Yes, because toxic fumes are dangerous and must be eliminated at any cost.
D) No, because the firms will pass the additional cost on to consumers.
Q4) What is an externality?
Page 7
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Chapter 6: Elasticity: the Responsiveness of Demand and Supply
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Sample Questions
Q1) When there are few close substitutes available for a good, demand tends to be
A) perfectly inelastic.
B) perfectly elastic.
C) relatively inelastic.
D) relatively elastic.
Q2) Suppose that when the price per ream of recycled printer paper rises from $4 to $4.50, the quantity demanded falls from 800 to 600 reams per day. Using the midpoint formula, what is the price elasticity of demand (in absolute value) over this range?
A) 0.003
B) 0.41
C) 2.43
D) 4
Q3) 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.
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Chapter 7: The Economics of Health Care
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Q1) The health care system in Japan is referred to as ________, under which every resident of Japan is required to enroll in either a private or the government-provided health insurance program.
A) an out-of-pocket system
B) a single-payer health care system
C) a universal health insurance system
D) socialized medicine
Q2) In the United States from 1981 to 2011, deaths from all of the following declined substantially except A) cancer.
B) kidney disease.
C) heart attacks.
D) strokes.
Q3) Explain why the rates of death due to kidney disease and diabetes has slightly increased in the United States since 1981.
Q4) Due to adverse selection, very few lemons will be sold in the market for used cars.
A)True
B)False
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Chapter 8: Firms, the Stock Market, and Corporate Governance
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Sample Questions
Q1) Explain the relationships between a corporation's shareholders, its board of directors, and its top managers.
Q2) What is the central role of financial intermediaries in a market economy?
A) the creation and printing of money
B) keeping the price level stable
C) bringing together savers and borrowers
D) providing safe deposit boxes for people and businesses
Q3) How much is a bond that pays $20 in coupon payments for 4 years and $1,000 at the end of the fourth year worth if the interest rate is 5%?
A) $822.70
B) $893.62
C) $1,070.92
D) $1,080
Q4) Which type of businesses earns the majority of revenues in the United States?
A) corporations
B) partnerships
C) sole proprietorships
D) none of these
Q5) Define a partnership.
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Chapter 9: Comparative Advantage and the Gains From International Trade
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Sample Questions
Q1) Refer to Figure 9-3. If there was no quota, how many pounds of peanuts would domestic producers supply?
A) 10 million
B) 28 million
C) 30 million
D) 40 million
Q2) Refer to Figure 9-5. The loss in domestic consumer surplus as a result of the tariff is equal to
A) $5 million.
B) $19.875 million.
C) $24.875 million.
D) $31.125 million.
Q3) Refer to Figure 9-1. Suppose the government allows imports of leather footwear into the United States. What will be the domestic quantity supplied?
A) 5 units
B) 10 units
C) 15 units
D) 20 units
Q4) What is a tariff?
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Chapter 10: Consumer Choice and Behavioral Economics
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Q1) If, as a person consumes more and more of a good, each additional unit adds less satisfaction than the previous unit consumed, we are seeing the workings of
A) the law of demand.
B) the law of supply.
C) the law of increasing marginal opportunity cost.
D) the law of diminishing marginal utility.
Q2) Which of the following is a common mistake consumers commit when they make decisions?
A) They take into account nonmonetary opportunity costs but ignore monetary costs.
B) They are overly pessimistic about their future behavior.
C) They fail to ignore sunk costs.
D) They sometimes value fairness too much.
Q3) Refer to Figure 10-9. The change in the budget constraint from BC1 to BC2 implies
A) the prices of DVDs and CDs have increased.
B) income and the prices of DVDs and CDs have increased.
C) the price of DVDs has increased and the price of CDs has decreased.
D) the price of DVDs has decreased and the price of CDs has increased.
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Page 12
Chapter 11: Technology, Production, and Costs
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Sample Questions
Q1) The relationship between the inputs employed by a firm and the maximum output that it can produce with those inputs is the firm's
A) production function.
B) supply curve, or supply schedule.
C) marginal product of labor.
D) average product of labor.
Q2) Which of the following is a fixed cost?
A) payment to hire a security worker to guard the gate to the factory around the clock
B) wages to hire assembly line workers
C) payments to an electric utility
D) costs of raw materials
Q3) The basic activity of a firm is
A) to set the prices of its products as high as possible.
B) to compete with other firms that produce similar products.
C) to provide jobs for its employees.
D) to use inputs to produce outputs of goods and services.
Q4) As the level of output increases, what happens to the value of average fixed cost, and what happens to the difference between the value of average total cost and average variable cost?
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Chapter 12: Firms in Perfectly Competitive Markets
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Sample Questions
Q1) In early 2007, Pioneer and JVC, two Japanese electronics firms, each announced that their profits were going to be lower than expected because they both had to cut prices for LCD and plasma television sets. Which of the following could explain why these firms did not simply raise their prices and increase their profits?
A) The move to cut prices is probably just a temporary one to gain market share. In the long run the firms will raise prices and be able to increase their profits.
B) Most likely, intense competition between these two major producers probably pushed prices down. Thereafter, each feared that it would lose its customers to the other if it raised its prices.
C) In perfect competition, prices are determined by the market and firms will keep lowering prices until there are no profits to be earned.
D) The firms are still making profits, just not as high as expected so there is room to lower prices until one can force the other out of business.
Q2) How are market price, average revenue, and marginal revenue related for a perfectly competitive firm and why?
Q3) What is meant by the term "long-run competitive equilibrium"?
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Page 14
Chapter 13: Monopolistic Competition: the Competitive
Model in a More Realistic Setting
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Sample Questions
Q1) Refer to Figure 13-8. Based on the diagram, one can conclude that
A) some existing firms will exit the market.
B) new firms will enter the market.
C) the industry is in long-run equilibrium.
D) firms achieve productive efficiency.
Q2) What is the difference between the terms "marketing" and "advertising"?
Q3) Which of the following statements is true about advertising by a monopolistically competitive firm?
A) Since the monopolistic competitor, like the perfect competitor, makes zero profit in the long run, it is a waste of resources to advertise its products.
B) Advertising could make the monopolistic competitor's demand more inelastic, but advertising has no effect on a perfect competitor's demand.
C) Advertising will be more beneficial if a monopolistic competitor colludes with other firms to advertise the products of the industry as a whole rather than an individual firm's product.
D) Monopolistically competitive firms tend to shun advertising because advertising draws attention to the variety of differentiated products available in the industry.
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Page 15
Chapter 14: Oligopoly: Firms in Less Competitive Markets
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Q1) Refer to Table 14-8. If the firms act out of individual self-interest, which prices will they select?
A) Both firms will select a high price.
B) Brawny Juice will select a high price, Power Fuel will select a low price.
C) Brawny Juice will select a low price, Power Fuel will select a high price.
D) Both firms will select a low price.
Q2) The barrier to entry that allowed Alcoa to make persistent economic profits was ownership of an essential input.
A)True
B)False
Q3) Refer to Table 14-7. Which of the following statements is true?
A) Neither Perfect nor Florabunda has a dominant strategy.
B) Perfect's dominant strategy is to offer same-day delivery; Florabunda's dominant strategy is to not offer same-day delivery.
C) Florabunda's dominant strategy is to offer same-day delivery; Perfect's dominant strategy is to not offer same-day delivery.
D) The dominant strategy for both firms is to offer same-day delivery.
Q4) List the competitive forces in the five competitive forces model.
Q5) Firms in an oligopoly are said to be interdependent. What does this mean?
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Chapter 15: Monopoly and Antitrust Policy
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Q1) Refer to Figure 15-3. What happens to the monopolist represented in the diagram in the long run?
A) It will raise its price at least until it breaks even.
B) If the cost and demand curves remain the same, it will exit the market.
C) The government will subsidize the monopoly to enable it to break even.
D) It will be forced out of business by more efficient producers.
Q2) Network externalities
A) can only exist when there are economies of scale.
B) prevent the dominance of a market by one firm.
C) exist when the usefulness of a product increases with the number of consumers who use it.
D) are created when celebrity endorsements of products lead to a surge in the demand for those products.
Q3) 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.
Q4) If you own the only bookstore in a small town, do you have a monopoly?
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Chapter 16: Pricing Strategy
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Q1) The term "early adopters" refers to
A) firms that are the first to implement a new technology that is used to produce new goods or services.
B) book clubs that are first to recommend best-selling books to their members.
C) consumers who respond quickly to fads, seasonal changes, etc.
D) consumers who are willing to pay high prices to be among the first to own new products.
Q2) Refer to Figure 16-3. Which group of customers is likely to have a more elastic demand curve (more sensitive to price)?
A) the other residents of the neighborhood-market B
B) There is no difference in the elasticity of demand between the two groups.
C) the customers from "The Chateau"-market A
D) There is insufficient information to answer this question.
Q3) Consider a discount retailer such as Costco which uses a two-part tariff pricing strategy. The Costco membership fee
A) buys the consumer the right to make future purchases at Costco.
B) is a resalable asset to the consumer.
C) is a resalable asset to the producer.
D) is used by Costco to cover its fixed costs of production.
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Chapter 17: The Markets for Labor and Other Factors of Production
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Q1) In many European countries it is much easier than in the United States for unemployed workers to receive generous wage replacement income from their governments.
A)True
B)False
Q2) In equilibrium, what determines the price of capital and what determines the price of natural resources?
Q3) A firm's demand for labor curve is also called its
A) marginal revenue product of labor curve.
B) marginal factor cost of labor curve.
C) marginal valuation curve.
D) marginal benefit of labor curve.
Q4) An increase in wages raises the opportunity cost of leisure and leads to an increase in the quantity supplied of labor.
A)True
B)False
Q5) What is the marginal productivity theory of income distribution?
Q6) The marginal product of labor curve is the demand curve for labor.
A)True
B)False Page 19
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Chapter 18: Public Choice, Taxes, and the Distribution of Income
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Q1) Most economists agree that some of the burden of the corporate income tax
A) is reduced because the tax is progressive.
B) is shared by the federal government.
C) is reduced because the tax is used to attain a social objective.
D) is passed on to consumers in the form of higher prices.
Q2) What is rent seeking and how is it related to regulatory capture?
Q3) How would the elimination of a sales tax affect the market for a product that had been subject to the tax?
A) The demand for the product would rise and the equilibrium price would fall by the amount of the tax.
B) The equilibrium price for the product would fall by less than the amount of the tax.
C) The reduction in government revenue from the tax would be made up by an increase in property taxes.
D) The supply of the product would become more elastic.
Q4) Refer to Figure 18-1. Area B + C + F + G represents
A) the portion of sales tax revenue borne by consumers.
B) the portion of sales tax revenue borne by producers.
C) the excess burden of the sales tax.
D) sales tax revenue collected by the government.
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Chapter 19: GDP: Measuring Total Production and Income
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Q1) Refer to Table 19-2. Suppose that a simple economy produces only four goods and services: shoes, DVDs, tomatoes, and ketchup. Assume one half of the tomatoes are used in making the ketchup and the other half of the tomatoes are purchased by households. Using the information in the above table, nominal GDP for this simple economy equals
A) $7,400.
B) $6,400.
C) $5,800.
D) 2,440 units.
Q2) If an American firm opens a production facility in India, the total value of the production will be included in the
A) gross domestic product of the United States.
B) national income of the United States.
C) gross domestic product of India.
D) national income of India.
Q3) The GDP deflator is a measure of the price level which is calculated as nominal GDP divided by real GDP and multiplied by 100.
A)True
B)False
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Chapter 20: Unemployment and Inflation
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Q1) Refer to Table 20-16. Looking at the table above, real wages ________ from 2011 to 2012, and real wages ________ from 2012 to 2013.
A) rose; rose
B) rose; fell
C) fell; rose
D) fell; fell
Q2) Which of the following describes the accuracy of the Consumer Price Index?
A) Changes in the CPI accurately reflect the true rate of inflation.
B) Changes in the CPI understate the true rate of inflation.
C) Changes in the CPI overstate the true rate of inflation.
D) Changes in the CPI are unrelated to the true rate of inflation.
Q3) Which of the following labor market statistics best indicates the amount of labor that is available to the economy from a given working-age population?
A) unemployment rate
B) discouraged-worker ratio
C) labor force participation rate
D) the ratio of minimum wage to inflation
Q4) What effect does the payment of government unemployment insurance have on the unemployment rate?
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Chapter 21: Economic Growth, the Financial System, and Business Cycles
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Q1) Potential GDP is always greater than real GDP in an economy.
A)True
B)False
Q2) Following the September 11, 2001, terrorist attacks, the managers of many hotels expected a prolonged period of reduced travel and responded by laying off workers and postponing or canceling new construction. Isadore Sharp, the chairman and CEO of Four Seasons Hotels, decided to
A) continue expanding and was able to maintain or enhance the company's market share.
B) continue expanding and the company ended up losing significant market share.
C) curtail expansion plans, and by significantly cutting back on expansion was able to maintain the company's market share.
D) curtail expansion plans and the company ended up losing significant market share.
Q3) An increase in the real interest rate results in which of the following?
A) an increase in the demand for loanable funds
B) a decrease in the demand for loanable funds
C) an increase in the quantity of loanable funds supplied
D) Both B and C will occur as a result of an increase in the real interest rate.
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Chapter 22: Long-Run Economic Growth: Sources and Policies
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Q1) Political stability is not a prerequisite to economic growth.
A)True
B)False
Q2) Productivity gains in the United States since 1990 have been ________ productivity gains in other leading industrial nations.
A) the same as
B) lower than
C) higher than
D) more variable than
Q3) Which of the following is not a reason why China is unlikely to maintain high enough rates of productivity growth to catch up with the standard of living in the United States?
A) The United States invests more in research and development. than does China.
B) Much of China's growth is likely due to the transition from a centrally-planned economy to a market economy.
C) Because of the low birth rate in China, the labor force will soon decline.
D) The Chinese migration of rural workers to more productive urban jobs.
Q4) Is knowledge capital subject to the law of diminishing returns? Explain.
Q5) List four types of government policies which can aid economic growth.
Page 25
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Chapter 23: Aggregate Expenditure and Output in the Short Run
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Q1) From 1983-2013, net exports for the United States
A) grew and then declined.
B) were negative.
C) were positive.
D) increased as exports rose above imports.
Q2) Each of the following is one of the four main categories of spending identified by John Maynard Keynes except A) consumption.
B) net exports.
C) government purchases.
D) taxes.
Q3) Aggregate expenditure includes consumption spending, planned investment spending, government purchases, and net exports.
A)True
B)False
Q4) On the 45-degree line diagram, the 45-degree line shows points where
A) real income equals real GDP.
B) real aggregate expenditure equals C + I.
C) real aggregate expenditure equals real GDP.
D) real aggregate output equals the quantity produced.
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Chapter 24: Aggregate Demand and Aggregate Supply Analysis
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Q1) When people became less concerned with the underlying value of their houses and instead focused on the expectations of the prices of their houses increasing, ________ occurred.
A) stagflation
B) an automatic destabilizer
C) a housing bubble
D) a supply shock
Q2) Refer to Figure 24-1. Ceteris paribus, an increase in personal income taxes would be represented by a movement from
A) AD1 to AD2.
B) AD2 to AD1.
C) point A to point B.
D) point B to point A.
Q3) Refer to Figure 24-3. Suppose the economy is at point A. If government spending increases in the economy, where will the eventual long-run equilibrium be?
A) A
B) B
C) C
D) D
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Chapter 25: Money, Banks, and the Federal Reserve System
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Q1) Suppose you withdraw $1,000 in cash from your checking account. Draw a T-account to show the effect of this transaction on your bank's balance sheet.
Q2) If people speculate that a run on one bank will cause a run on all banks in the financial system, and this speculation proves accurate, then the financial system would experience what is known as a A) commodity crisis.
B) securitization meltdown.
C) bank panic.
D) institutional death spiral.
Q3) One way investment banks differ from commercial banks is that investment banks A) lend exclusively to households.
B) do not take in deposits.
C) only buy and sell mortgages.
D) trade only in foreign exchange markets.
Q4) Suppose that the required reserve ratio is 10 percent and you withdraw $25,000 from Comerica Bank. What is the deposit multiplier? What is the total decrease in deposits in the banking system? What is the change in the money supply?
Q5) How do open market operations work?
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Chapter 26: Monetary Policy
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Q1) If the Federal Reserve targets the interest rate and the money demand curve shifts to the left, then the Fed
A) cannot maintain the interest rate target.
B) can maintain the interest rate target, but at a lower quantity of the money supply.
C) can maintain the interest rate target, but at a higher quantity of the money supply.
D) can maintain the interest rate target with no change in the money supply.
Q2) If the Federal Reserve targets the money supply, and the money demand curve shifts to the left, then the Fed
A) cannot maintain the money supply target.
B) can maintain the money supply target, but at a lower interest rate.
C) can maintain the money supply target, but at a higher interest rate.
D) can maintain the money supply target with no change in the interest rate.
Q3) One of the monetary policy goals of the Federal Reserve is price stability. A)True
B)False
Q4) List the Fed's four main monetary goals.
Q5) What problems can high inflation rates cause for the economy?
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Page 29
Chapter 27: Fiscal Policy
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Q1) In preparing their estimates of the stimulus package's effect on GDP, Obama administration economists estimated a government purchases multiplier of 1.57. This indicates that a $1 billion increase in government purchases would increase equilibrium real GDP by
A) $1 billion.
B) $1.57 billion.
C) $15.7 billion.
D) $157 billion.
Q2) 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
Q3) Expansionary fiscal policy involves
A) increasing government purchases or decreasing taxes.
B) increasing taxes or decreasing government purchases.
C) increasing the money supply and decreasing interest rates.
D) decreasing the money supply and increasing interest rates.
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Chapter 28: Inflation, Unemployment, and Federal Reserve Policy
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Q1) Lucas and Sargent argue that the short-run trade-off between unemployment and inflation is caused by
A) workers and firms using Fed policy to predict inflation.
B) workers and firms using all the information available to predict inflation.
C) workers and firms rapidly adjusting wages and prices in response to changes in expectations.
D) workers and firms being fooled by unexpected changes in monetary policy.
Q2) Refer to Figure 28-2. Suppose the economy is at point C. If the Fed decreases the money supply so that inflation falls, the economy will ________ in the long run, holding all else constant.
A) eventually move to point A
B) eventually move to point B
C) stay at point C
D) move to point A and then back to point B
Q3) Ceteris paribus, in the short run following a decrease in the rate of growth in Aggregate Demand, we would expect to see an increase in the rate of unemployment and a decrease in the rate of inflation.
A)True
B)False
Page 31
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Chapter 29: Macroeconomics in an Open Economy
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Q1) The decline in the value of the yen after 2012 occurred as a result of the Japanese central bank, the Bank of Japan, following an expansionary monetary policy. Investors expected that the result would be lower nominal Japanese interest rates and a higher inflation rate. In response, investors ________, causing the value of the yen to decline against the dollar.
A) sold Japanese financial assets and bought U.S. financial assets
B) sold Japanese financial assets and sold U.S. financial assets
C) bought Japanese financial assets and sold U.S. financial assets
D) bought Japanese financial assets and bought U.S. financial assets
Q2) If net exports are equal to net foreign investment,
A) the balance of payments is zero.
B) the current account balance is equal to the negative of the financial account balance.
C) net capital inflows are equal to imports minus exports.
D) All of the above are true when net exports are equal to net foreign investment.
Q3) Public saving equals taxes minus government spending minus transfer payments.
A)True B)False
Q4) Why is the balance of payments always zero?
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Chapter 30: The International Financial System
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Q1) The gold in Fort Knox backs all U.S. currency.
A)True
B)False
Q2) A currency pegged at a value below the market equilibrium exchange rate is A) overvalued.
B) undervalued.
C) achieving purchasing power parity.
D) None of the above are correct.
Q3) What do reports that the dollar is "overvalued" mean? How will foreign exchange markets respond to this information? Support your answer graphically.
Q4) All of the following actions were taken by the Thai government to help Thailand maintain its peg against the dollar in the 1990s except
A) borrowing dollars from the International Monetary Fund in exchange for baht.
B) buying baht on the foreign exchange market to support higher demand for the baht.
C) increasing domestic interest rates to attract more foreign investors.
D) imposing restrictions on exports to the United States to prevent too many dollars from entering the economy.
Q5) Describe the four determinants of exchange rates in the long run.
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