Refer to Figure 12.5. If exchange rates are floating, the Fed ...

[Evvie72]

Refer to Figure 12.5. If exchange rates are floating, the Fed decreasing its target inflation rate would best be represented by a movement from ________ in panel (a) and a corresponding movement from ________ in panel (b).
 
  A) point A to point B; point X to point Y
  B) point C to point A; point X to point Y
  C) point D to point C; point Y to point X
  D) point B to point D; point Y to point X

Question 2

A higher desired level of capital and investment will result from ________.
 
  A) a decrease in productivity
  B) a fall in expected future output
  C) a depressed economy
  D) a booming economy

[Joc]

Answer to Question 1

C

Answer to Question 2

D