According to the "beachhead effect," in order to undo the effects of a strong-dollar period, the real value of the dollar
a. must fall to at least half of its value before appreciation of the dollar began.
b. must fall to a much lower level than it had before appreciation of the dollar began.
c. must fall to the value it had before appreciation of the dollar began.
d. must actually appreciate before it depreciates to undo the effects of a strong-dollar period.
Answer: B
FIN 201
- Whether real seignorage revenue increases when the rate of money growth increases depends on whether
- Consider an economy that has the following monetary data. Currency held by the nonbank public = $300 Bank reserves = $50 Monetary base = $350 Deposits = $700 Money supply = $1000 The monetary base and the money supply are expected to grow at a constant rate of 20% per year. Inflation and expected inflation are 20% per year. Suppose that bank reserves and currency pay no interest, all currency is held by the public, and bank deposits pay no interest. What is the nominal value of seignorage over the year?
- Consider an economy that has the following monetary data. Currency held by the nonbank public = $300 Bank reserves = $50 Monetary base = $350 Deposits = $700 Money supply = $1000 The monetary base and the money supply are expected to grow at a constant rate of 20% per year. Inflation and expected inflation are 20% per year. Suppose that bank reserves and currency pay no interest, all currency is held by the public, and bank deposits pay no interest. What is the cost to the public of the inflation tax?
- Real money demand in the economy is given by L = 0.5Y - 2500i, where Y is real income and i is the nominal interest rate. In equilibrium, real money demand L equals real money supply M/P. Suppose that Y equals 1000 and the real interest rate is 0.02. What is the maximum amount of seignorage revenue?
- Real money demand in the economy is given by L = 0.5Y - 2500i, where Y is real income and i is the nominal interest rate. In equilibrium, real money demand L equals real money supply M/P. Suppose that Y equals 1000 and the real interest rate is 0.02. At what rate of inflation is seignorage maximized?
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- Seignorage is the revenue a government raises by
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- The average cost of the distortion created by taxes
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- Suppose that all workers place a value on their leisure of 40 goods per day. The production function relating output per day Y to the number of people working per day N is Y = 200N - N^2 and the marginal product of labor is MPN = 200 - 2N. A 20% tax is levied on wages. Output per day would be
- A decrease in the average tax rate, with the marginal tax rate held constant, will
- An increase in the marginal tax rate, with the average tax rate held constant, will