The major difference between absolute purchasing power parity (APPP) and the law of one price (LOOP) is:
a. APPP deals with the equilibrium exchange rate for one good, and LOOP deals with the equilibrium exchange rate for a basket of goods.
b. APPP deals with changes in nominal exchange rates for a basket of goods, and LOOP deals with levels of exchange rates for a particular good.
c. APPP deals with changes in nominal exchange rates for a basket of goods, and LOOP deals with changes of exchange rates for a particular good.
d. APPP deals the equilibrium exchange rate for a basket of goods, and LOOP deals with the equilibrium exchange rate for one particular good.
e. None of the above.
.D
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Over twenty years ago the city of Washington D.C. was facing a budgetary shortfall. In a plan to increase tax revenue the mayor and city council agreed to raise the excise tax on gasoline
Typically for goods like gasoline which are price inelastic this should have led to an increase in tax revenue. However, just the opposite happened – tax revenue plummeted! What could explain this seemingly paradoxical result?
Suppose the daily demand for Coke and Pepsi in a small city are given by QC = 90 - 100PC + 400(PP - PC) and QP = 90 - 100PP + 400(PC - PP), where QC and QP are the number of cans Coke and Pepsi sell, respectively, in thousands per day. PC and PP are the prices of a can of Coke and Pepsi, respectively, measured in dollars. The marginal cost is $0.45 per can for both Coke and Pepsi. What is Coke's inverse demand function?
A. QC = (90 - 400PP) - 500PC B. PC = (0.18 + 0.8PP) - 0.002QC C. QC = (490 - 400PC) D. PC = (400 - 500QC)
All of the following are income in kind EXCEPT
A) government provided housing. B) government provided education. C) tips received by a waitress. D) goods produced in the home.
Changing from a barter economy to a money economy can reduce transaction costs
Indicate whether the statement is true or false