D) -90 billion pesos 28. If Mexico has foreign assets worth $100 billion and no

Question

D) -90 billion pesos 28. If Mexico has foreign assets worth $100 billion and no liabilities, a 15% depreciation of the peso will: A) result in an increase in liabilities at home by loo billion pesos. B) result in a decrease in assets at home by 150 billion pesos. C) result in a decrease in overall wealth by 15%. D) result in an increase in overall wealth. 29. What is meant by the term inflation bias? A) Policy makers who allow exchange rates to continually depreciate are willing to accept higher rates of inflation. B) Policy makers who accept higher rates of inflation are willing to allow exchange rates to continually depreciate. C) policy makers who use expansionary monetary policy for short term gain, at the expense of higher inflation in the longer run D) fiscal policy makers who use deficit financing to stimulate the economy at the expense of higher long run inflation 30. A currency union is: A) a trade agreement between countries. B) a customs union between countries. C) when countries abandon their domestic currency and adopt a common currency. D) a free trade area.

Explanation / Answer

28) C: Result in a decrease in overall wealth by 15%

29) D

30) C

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