Which of the following is a FALSE statement concerning purchasing power parity?
A) Purchasing power parity states that dollars will tend to exchange for pounds at a rate that maintains a constant purchasing power of a given quantity of a currency.
B) Over the long term, a Big Mac in New York will tend to cost the same as a Big Mac in London.
C) There should not be significant deviations in the long-run value of purchasing power parity.
D) Over the long run, purchasing power parity exerts influence over exchange rates.
E) An overvalued dollar buys more in Britain than it does in the United States.
C
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The common term for a severe recession is a
A) bottoming out. B) economic adjustment. C) depression. D) downturn.
“Plowback” represents a portion of corporate profits that are used to
A. invest in future activities of the corporation. B. advertise the company’s product. C. buy back bonds (reduce debt). D. pay owners for the use of their capital.
Under a floating rate system, exchange rates are determined by supply and demand in the foreign exchange market without government intervention
a. True b. False
Economists believe that scarcity forces everyone to:
a. satisfy all their wants. b. abandon consumer sovereignty. c. lie about their wants. d. create unlimited resources. e. make choices.