A country which does not devalue when financial markets expect it to will probably suffer
A) a real appreciation of its currency.
B) higher interest rates.
C) a default on its national debt.
D) all of the above
E) none of the above
Question 2
At the current steady state capital-labor ratio, assume that the steady state level of per capita consumption, (C/N), is less than the golden rule level of steady state per capita consumption. Given this information, we can be certain that
A) an increase in the saving rate will cause an increase in the steady state level of per capita consumption ((C/N)).
B) a reduction in the capital-labor ratio will cause a reduction in (C/N).
C) the capital labor ratio will tend to increase over time.
D) the capital labor ratio will tend to decrease over time.
E) a reduction in the saving rate will have an ambiguous effect on (C/N).
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