Suppose the exchange rates between the United States and Canada are in long-run equilibrium as defined by the idea of purchasing power parity. If the law of one price holds perfectly, then differences between U.S
and Canadian rates of inflation would A) have no effect on nominal exchange rates.
B) be completely offset by changes in the real exchange rate.
C) be completely offset by changes in the nominal exchange rate.
D) violate the conditions for the law of one price.
E) lead to a change in the real purchasing power of each country's currency when it is converted to the other country's currency.
C
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In the long run, entry ensures that the typical monopolistically competitive firm will
a. produce at minimum efficient scale b. earn an economic profit c. earn a normal profit d. price its output at marginal cost e. standardize its product
Given the demand curve for laptop computers, if the government began to encourage households to own a computer by providing a subsidy to each family that buys one,
a. both the equilibrium price and quantity of laptops will increase b. both the equilibrium price and quantity of laptops will decrease c. the equilibrium price of laptops will increase but the equilibrium quantity will decrease d. the equilibrium price of laptops will decrease but the equilibrium quantity will increase e. subsidies to households have no effect on either the supply or demand
The federal funds rate is determined in a market and targeted by the Fed
a. True b. False
The decision by firms of the quantity of each input to demand is based on
A. the price of output. B. government oversight. C. the price of inputs. D. techniques of production available.