Why is it true that exchange rates tend to be equal worldwide? Briefly explain
What will be an ideal response?
Explain that arbitrage would result in equal exchange rates, and end when transactions costs are equal to the difference in exchange rates.
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All of the following are examples of spending on goods and services in the circular flow model except
A) Chaitanya buys a new spa pedicure chair for her expanding nail salon business. B) Hernan buys a pizza at Papa C's. C) Lenny buys a new digital camera to take pictures at his son's graduation. D) Amanda purchases a new electric guitar to pursue her hobby seriously.
Suppose that the economy is at long-run equilibrium. If there is a sharp decline in the stock market combined with a significant increase in immigration of skilled workers, then in the short run
a) the price level will fall, and real GDP will fall. b) real GDP will fall and the price level might rise, fall, or stay the same. c) real GDP will rise and the price level might rise, fall, or stay the same. d) the price level will fall, and real GDP might rise, fall, or stay the same. e) the price level will rise, and real GDP might rise, fall, or stay the same.
According to new growth theory, per capita growth is:
A. limited by learning by doing. B. limited by diminishing marginal productivity. C. unlimited if production is characterized by increasing returns to scale. D. unlimited if production is characterized by constant marginal productivity.
Firms improve their market positions over time through which of the following?
(A) path dependence (B) the innovation cycle (C) core rigidities (D) imitating other firms