State the formula for the relationship between the purchasing power of the U.S. dollar and the price level.
What will be an ideal response?
The purchasing power of the U.S. dollar is inversely related to the price level: Value of the dollar ($V) = 1 divided by price level (P) expressed as an index number (in hundredths), or $V = 1/P.
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Price ceilings set a legal maximum price on a product or commodity.
Answer the following statement true (T) or false (F)
An increase in capital inflows will
A) increase the equilibrium exchange rate. B) increase net foreign investment. C) increase capital outflows. D) decrease capital outflows.
Which of the following do not suffer the costs of inflation?
A) firms that have to devote more time and labor to raising prices B) persons on fixed incomes C) persons whose incomes rise more rapidly than inflation D) an investor that has to pay higher taxes because of the inflation
Barriers to entry do not occur when:
a. economies of scale in production exist in an industry. b. firms requires a professional license or franchise agreement. c. the firm that introduces a product is granted a patent. d. a firm controls a scarce resource. e. diseconomies of scale in production exist in an industry.