Discuss the short-run and long-run views of PPP. Make sure that you explain the underlying adjustment mechanism and theoretical reasoning for each view when answering the question
Which view, do you think, is more likely to represent the real world?
If PPP holds in the short run, then capital flows change money supplies and prices quickly. If PPP holds only in the long run, then prices must adjust slowly following a faster adjusting exchange rate.
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Based on the figure below. Starting from long-run equilibrium at point C, a decrease in government spending that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at__ creating _____gap.
A. B; no output B. D; an expansionary C. B; recessionary D. D; a recessionary
Use the figure below to answer the following question.
What area represents society's total surplus after the government imposes the excise tax on the market?
A. triangle $1c$9 plus triangle $21a$13 B. triangle abc C. square $13ac$9 plus triangle abc D. triangle $1c$9 plus triangle $21a$13 plus rectangle $13ac$9
The sale of a used automobile would not be included in GDP of the current year because it is ________.
A. not a market transaction B. not current production C. a private transfer payment D. a purely financial transaction
A good that a person can be prevented from consuming is referred to as a(n) _____ good
a. non-excludable b. excludable c. rival d. non-rival