1. An increase in the U.S. exchange rate will make U.S. exports A. less attracti
ID: 1113222 • Letter: 1
Question
1. An increase in the U.S. exchange rate will make U.S. exports
A. less attractive to foreigners and imports from other countries more attractive to the United States
B. less attractive to foreigners and imports from other countries less attractive to the United States.
C. more attractive to foreigners and imports from other countries more attractive to the United States
2. In deciding how much money to hold, individuals
A. Base their decisions off what others are doing
B. must understand the velocity of the money and its role in the economy
C. evaluate the relative costs and benefits of holding money versus other assets.
3. When people hold money to make anticipated purchases of goods and services, they are exercising the _______ demand for money
A. Exchange
B. Transactions
C. Precautionary
4. The opportunity cost of holding money is
A. The liquidity foregone
B. the decrease in risk from holding money rather than a bond fund
C. the higher interest rates that can be earned by holding a bond fund
Explanation / Answer
Ans:
1) Option A
less attractive to foreigners and imports from other countries more attractive to the United States
In case of increase in the U.S. exchange rate the imports become cheaper but the exports become more costly resulting in U.S. exports less attractive to foreigners.
2) Option C
evaluate the relative costs and benefits of holding money versus other assets.
The decision to hold money should be made considering the cost and benefits of holding it and the other alternatives in which it can be invested for larger benefits.
3) Option B
Transactions
When money is held to purchase goods and services they are exercising the transactions demand for money. since anticipated purchases is a transcation demanding money.
4) Option C
the higher interest rates that can be earned by holding a bond fund
Opportunity cost is the benefit forgone by chosing an alternative instead of another. In this case when you choose to hold money the benefit forgone is the higher interest rates that can be earned by holding a bond fund.
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