The Transition to Floating Exchange Rate Regimes in the 1970s

question 68

True/False

The transition to floating exchange rate regimes in the 1970s (described in Chapter .3) changed the focus from the total BOP to its various subaccount like the current and financial account balances.

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Definitions:

Backward-Bending

Describes a labor supply curve reflecting a situation where higher wages lead to a decrease in labor supplied because individuals opt for leisure over work.

Labor Supply Curve

A graphical representation showing the relationship between the different levels of wages and the quantity of labor workers are willing to supply.

Income Effect

A person’s willingness to give up some income in exchange for more leisure time.

Substitution Effect

If the price of a resource, say labor, goes up, business firms tend to substitute capital or land for some of their now-expensive workers. Also, the substitution of more hours of work for leisure time as the wage rate rises.