Author Question: When firms reduce their target level of inventories, planned investment ________, and equilibrium ... (Read 60 times)

tnt_battle · **on:** Jun 29, 2018

When firms reduce their target level of inventories, planned investment ________, and equilibrium expenditure and real GDP ________.

A) rises; increase
B) falls; remains the same
C) rises; decrease
D) falls; decrease
E) falls; increase

Question 2

In the foreign exchange market, how does a change in expected future U.S. exchange rate affect the demand for dollars?

What will be an ideal response?

annierak · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

D

Answer to Question 2

Changes in the expected future exchange rate change the demand for dollars. If the expected future exchange rate falls, the demand for dollars decreases and the demand curve shifts leftward because the expected profit from holding dollars decreases. If the expected future exchange rate rises, the demand for dollars increases and the demand curve shifts rightward because the expected profit from holding dollars increases.