Purchasing power parity implies:
A. a basket of goods will sell for the same price in all countries as long as there are no trade barriers is a free flow of capital across borders.
B. a basket of goods should sell for the same price in all countries, even if trade barriers exist.
C. as long as all goods and services are traded freely across international boundaries, one unit of domestic currency should buy the same basket of goods anywhere in the world.
D. a basket of goods cannot sell for the same price in different countries due to the different wage rates.
Answer: C
You might also like to view...
The required reserve ratio
A) is the amount of money that banks require borrowers to reserve in their accounts. B) is the fraction of a bank's total deposits that is required to be held in reserves. C) increases when withdrawals from a bank are made. D) is higher for banks that make riskier loans.
The cost of child care in a city declines during two subsequent quarters in a year. Which of the following changes is likely to be observed in the labor market on account of this trend? a. The quantity supplied of labor will decrease
b. The quantity of labor demanded will decrease. c. The labor supply curve will shift to the right. d. The demand for labor curve will shift to the left.
One of the dangers of growing government debt is that:
A. it makes monetary policy more difficult by tying up more of the money supply in loans to the government. B. it pushes down interest rates which can lead to overspending by households and businesses. C. more of the budget goes to pay interest on the debt, making it harder to act in a future recession. D. debts have to be repaid with future income.
If personal income tax rates are decreased in an attempt to stimulate spending, we should expect to see
A. an increase in consumption and an increase in GDP. B. an increase in consumption and a decrease in GDP. C. a decrease in consumption and a decrease in GDP. D. a decrease in consumption and an increase in GDP.