Currency traders expect the dollar to appreciate. What impact will this have on equilibrium in the foreign exchange market?
A) The dollar will appreciate, and the equilibrium quantity of dollars will increase.
B) The dollar will appreciate, and the equilibrium quantity of dollars will decrease.
C) The dollar will depreciate, and the equilibrium quantity of dollars exchanged will decrease.
D) The dollar will appreciate, and the change in the equilibrium quantity of dollars exchanged cannot be determined.
Question 2
Which of the following is not an argument against inflation targeting?
A) Inflation targeting reduces the flexibility of the Fed to pursue other policy goals.
B) Inflation targeting assumes that the Fed can accurately forecast future inflation rates.
C) Inflation targeting holds the Fed accountable for an inflation goal, but may make it less likely the Fed will achieve other goals.
D) Inflation targeting makes monetary policy ineffective because the targets are publicly announced.
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