Author Question: When policy makers decide to revalue the currency, such an action generally represents A) an ... (Read 85 times)

xroflmao · **on:** Jun 30, 2018

When policy makers decide to revalue the currency, such an action generally represents

A) an increase in the pegged value of the domestic currency.
B) a decision to let the currency float.
C) a reduction in the foreign price level.
D) an increase in the domestic price level.
E) none of the above

Question 2

Suppose there is a reduction in the saving rate. Explain what effect this will have on output, output per worker, the rate of growth of output, and the rate of growth of output per worker.

What will be an ideal response?

peter · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

A

Answer to Question 2

The reduction in s will cause a decrease in S/N and I/N. At the initial K/N, depreciation is more than investment. Alternatively, there is not enough investment to offset the amount of capital that wears out. So, the capital stock will decrease. This will cause a decrease in K/N, Y/N, and S/N. As Y/N falls, so will C/N.