A High Degree of Real Wage Flexibility Will Tend to Reduce

question 33

Multiple Choice

A high degree of real wage flexibility will tend to reduce the costs to a country of joining a currency union because

• A) all of the reasons given in these answers are correct.
• B) real wages fall rapidly in a recession and the economy moves quickly back to long-run equilibrium, so limiting the duration of the recession even when exchange rate adjustment is not possible.
• C) workers will move from a country in which aggregate demand falls to other countries of the currency union, and so unemployment remains lower than it otherwise would.
• D) real wages fall and so offset the inflationary effect of switching from the old currency to the new common currency.

Distinguish between different classifications of the law and their significance.

Recognize the supremacy of federal statutes over state laws as per the U.S. Constitution.

Know the role of William Blackstone in defining law and understand the concept of common law.

Understand common law and civil law systems, and the processes involved in each.

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Definitions:

Coupon Bond

A bond that offers interest payments to its holder at regular intervals until the bond's maturity, whereupon the face value is repaid.

Ask Price

The lowest price a seller is willing to accept for an asset on the market.

Accrued Interest

The interest that has accumulated on a bond or loan since the last interest payment was made.

Conversion Premium

The additional amount that an investor pays over the current market price to convert a convertible security into a predetermined number of common shares.