For any pair of countries, there is only one single exchange rate that can lead automatically to both countries realizing the gains from specialization and comparative advantage.
Answer the following statement true (T) or false (F)
False
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When the price level rises as a result of a decrease in aggregate supply, it is called cost-push inflation
a. True b. False Indicate whether the statement is true or false
Suppose a Dell computer that sells for $2,000 in the U.S. is exported to Canada, where it sells for 2,500 Canadian dollars. Further assume that 1.5 Canadian dollars trade for one U.S. dollar in the foreign exchange market. According to the purchasing power parity theory, which of the following will occur?
a. Computers could be purchased in Canada for 2,500 Canadian dollars, and sold in the U.S. for $2,000 . The $2,000 in revenue from each computer sold could then be exchanged for 3,000 Canadian dollars, yielding a profit of 500 Canadian dollars for each computer sold (minus any transaction costs). b. Computers could be purchased in the U.S. for $2,000 and sold in Canada for 2,500 Canadian dollars. The 2,500 Canadian dollars in revenue from each computer sold could then be exchanged for $3,000, yielding a profit of $500 for each computer sold (minus any transaction costs). c. Purchasing power parity is achieved, and there is no profit to be had from reselling the computers. d. The demand for computers would rise in both the countries and purchasing power parity would be achieved.
In labor markets, the substitution effect occurs when
A) a substitute good also functions as a complement. B) the cost of production falls enough that the firm will produce a larger amount of output. C) a change in the price of a substitute input causes the demand for labor to change in the same direction. D) a change in the price of a substitute input reduces the cost of capital.
Injunctions are good remedies for problems where damage has already occurred.
Answer the following statement true (T) or false (F)