A Starbucks Grande Latte costs $3.75 in the U.S. and 28 yuan in China. The nominal exchange rate is 6.75 yuan per dollar. The real exchange rate is
a. 1.106 . If purchasing-power parity held the nominal exchange rate would be higher.
b. 1.106 . If purchasing-power parity held the nominal exchange rate would be lower.
c. .904 . If purchasing power parity held the nominal exchange rate would be higher.
d. .904 . If purchasing-power parity held the nominal exchange rate would be lower.
c
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Distinguish between the short-run and long-run factors that affect residential investment
What will be an ideal response?
Suppose an individual has a fixed amount of wealth to allocate between consumption in two periods (c1 and c2). Any funds not spent in period 1 will earn interest (at the rate r) which will increase purchasing power in period 2 . Consider four possible reactions to an increase in r: I. c1 increases. II. c1 decreases. III. c2 increases. IV. c2 decreases. Which of these is consistent with the
hypothesis that both c1 and c2 are normal goods? a. I, II, III, and IV b. I, II, and IV, but not III c. I, III, and IV, but not II d. I, II and III, but not IV
When arbitrage occurs across countries with a flexible exchange rate and when the bonds in each country are identical and there are no barriers to capital flows then the:
A. expected return on the bonds will be identical. B. inflation rates in each country will be identical. C. prices of the bonds will be identical. D. interest rates on the bonds will be identical.
The economy of Mainland uses gold as its money. If the government discovers a large reserve of gold on their land
a. the supply of money decreases and the value of money rises. b. the supply of money increases and the value of money falls. c. the demand for money increases and the value of money rises. d. the demand for money decreases and the value of money falls.