If the demand for Home exports decreased abroad, the Home fall in ...

[Destiiny22]

If the demand for Home exports decreased abroad, the Home fall in output would be greatest
 
  A) if the decrease was temporary and the exchange rate was fixed.
  B) if the decrease was temporary and the exchange rate was floating.
  C) if the decrease was permanent and the exchange rate was fixed.
  D) if the decrease was permanent and the exchange rate was floating.
  E) if the decrease was permanent and the exchange rate was high.

Question 2

Explain how the German Bundesbank gained its low-inflation reputation.
 
  What will be an ideal response?

[Brummell1998]

Answer to Question 1

C

Answer to Question 2

Mainly, Germany's experience with hyperinflation on the 1920s and again after World War II left the German electorate with a deeply rooted fear of inflation. The law establishing the Bundesbank singled out the defense of the DM's real value as the primary goal of the German central bank.

[Destiiny22]

TYSM

[dantucker]

Excellent