How will an increase in the U.S. productivity of labor versus labor in the European Union impact the real exchange rate, all other factors held constant? Explain.
What will be an ideal response?
An increase in the productivity of American labor relative to European labor would cause prices in the U.S. to decrease relative to European prices. This would mean a basket of American goods would purchase more European goods, so American products will seem cheap relative to European goods.
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The market value of all domestically produced final goods and services are also equal to the total amount spent by ________ less spending on imported goods and services.
A. households, firms, and governments B. households, firms, and the foreign sector C. households, firms, governments, and the foreign sector D. households and firms
Refer to Figure 11.2. Suppose that Ca = 40, MPC = 0.8, I = 10. Equilibrium income is
A) 40. B) 50. C) 250. D) 400.
What is the ratio that defines labor productivity?
A) (Y/N) B) (Y/Q) C) (Y/A) D) (Y/K)
In the market for euros, the demand for euros (€) is
A) downward sloping, because at lower dollar prices for the euro, U.S. residents will buy more European goods and services. B) upward sloping, because at higher dollar prices for the euro, U.S. residents will buy more European goods and services. C) upward sloping, because at higher dollar prices for the euro, Europeans will buy more U.S. goods and services. D) horizontal, because dollar prices of euros and euro prices of dollars are directly related.