What is purchasing power parity?
What will be an ideal response?
Purchasing power parity means "equal value of money," that is, the exchange rate adjusts so that one currency can buy the same amount of goods and services as another currency.
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A leftward shift of the BP schedule co the result of an
a. exogenous rise in import demand. b. exogenous fall in export demand. c. increase in the foreign demand for capital. d. increase in the foreign interest rate. e. both a and b.
A fiscal policy action to close an expansionary gap is to:
A. decrease taxes. B. increase the marginal propensity to consume. C. increase transfer payments. D. decrease government purchases.
A firm derives revenue from two sources: goods X and Y. Annual revenues from good X and Y are $10,000 and $20,000, respectively. If the price elasticity of demand for good X is ?2.0 and the cross-price elasticity of demand between Y and X is 1.5, then a 4 percent increase in the price of X will:
A. increase total revenues from X and Y by $400. B. increase total revenues from X and Y by $800. C. decrease total revenues from X and Y by $400. D. increase total revenues from X and Y by $8,000.
Ceteris paribus, if more alternative forms of energy become available, we would expect the demand for gasoline to become:
A. more elastic. B. more inelastic. C. perfectly elastic. D. perfectly inelastic.