100%(8)8 out of 8 people found this document helpful
This preview shows page 12 out of 12 pages.
and education (since society benefits from having better educated individuals).A negative externality occurswhen costs are incurred by some third-party who is not directly involved in the market exchange.Exampleswould include noise generated by a very loud stereo (since neighbors would be negatively impacted) and anypolluting activity.PTS:1DIF:Difficulty: ChallengingNAT:BUSPROG: AnalyticLOC:DISC: Markets, market failure, and externalitiesKEY:Bloom's: Application52.ANS:The demand for French Euro would come from people in the United States that want to buy French goods,services and financial assets. The supply of Euro would come from people in France that want to buyAmerican goods, services and financial assets. The Euro would appreciate in value if: 1) income growth rateswere higher in the U.S. than in France; 2) inflation was relatively higher in the U.S. than in France; 3) realinterest rates were relatively higher in France than in the United States.PTS:1DIF:Difficulty: ChallengingNAT:BUSPROG: AnalyticLOC:DISC: International trade and financeKEY:Bloom's: Application53.ANS:The Mexican government could buy pesos (and sell dollars) which would increase the demand for pesos.TheMexican central bank could increase interest rates which would motivate some investors to purchase Mexicanbonds, thereby increasing the demand for pesos.The government could increase trade restrictions on goodsimported into Mexico from the United States, which would decrease the demand for dollars (and thusdecrease the supply of pesos).A final solution might be for the Mexican government to devalue the peso.PTS:1DIF:Difficulty: ChallengingNAT:BUSPROG: AnalyticLOC:DISC: International trade and financeKEY:Bloom's: Application
We have textbook solutions for you!
The document you are viewing contains questions related to this textbook.