Briefly explain the difference between absolute and relative PPP
What will be an ideal response?
Absolute PPP deals with levels of variables while relative PPP deals with changes in these variables. Therefore absolute PPP says that the exchange rate between any two currencies is equal to the ratio of their price indexes while relative PPP indicates that the percentage change in the exchange rate is equal to the inflation differentials between the countries.
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The minimum wage in 2008 was $6.55 cents until July 2008 when it was raised to $7.25. If the minimum wage in June was below the equilibrium wage and the increased wage in July was above the equilibrium wage, then
A) firms' producer surplus was greater in June than in July. B) unemployment was unaffected by the increase. C) the deadweight loss was greater in June than in July. D) employment of low-skilled workers increased in July.
The manager of a baseball team wants to hire a new pitcher for $4 million per year. Under what circumstances would it make sense for the team to do so?
What will be an ideal response?
In a simple economy without government or the foreign sector, saving must equal investment because output is divided into consumption and investment, and income is either consumed or saved.
Answer the following statement true (T) or false (F)
In the above figure, the equilibrium level of planned saving plus net taxes is
A. $1.0 trillion. B. $2.0 trillion. C. $3.0 trillion. D. $4.0 trillion.