According to purchasing-power parity what should the nominal exchange rate between the U.S. and another country be equal to?
a. 1
b. the real exchange rate between the U.S. and that country
c. the price level in the U.S. divided by the price level in the other country
d. the price level in the other country divided by the price level in the U.S.
d
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Refer to Figure 21-25. Suppose the price of good X is $10, the price of good Y is $5, and the consumer’s income is $210. Then the consumer’s optimal choice is represented by a point on which curve?
a. I4
b. I2
c. I3
d. I1
Autonomous consumption
A. is measured by the slope of the consumption function. B. is measured by the intercept of the consumption function and the Y-axis. C. is equal to the minimum savings. D. is the reciprocal of consumption.
Which of the following is true of investment spending? a. It depends on perceptions about future economic conditions
b. It increases as the current level of real gross domestic product increases. c. As the expected rate of return on investment spending decreases, the investment spending function shifts upward. d. As the real interest rate decreases, the investment spending function shifts downward.
According to the classical economists, actual real GDP
A. never equals actual aggregate income. B. is not related to aggregate income. C. always equals actual aggregate income. D. sometimes equals actual aggregate income.