What are the "deep" factors that change exchange rate expectations?
What will be an ideal response?
The "deep" factors that change exchange rate expectations are purchasing power parity and interest rate parity. Purchasing power parity is the proposition that money buys the same amount of goods and services in different currencies differences. If purchasing power parity does not prevail, in the long run the exchange rate changes so that it holds. People realize this change will occur and so it factors into their expectations of the exchange rate. Interest rate parity is the proposition that the interest rate in one currency equals the interest rate in another currency when exchange rate changes are taken into account. If interest rate parity does not prevail, the exchange rate changes immediately so that it holds. People realize that interest rate parity always prevails so it factors into their expectations of the exchange rate.
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Any factor that shifts the demand curve to the left but does not affect the supply curve will lower the equilibrium price and raise the equilibrium quantity.
Answer the following statement true (T) or false (F)
If a good has only a few, poor substitutes, is its demand elastic or inelastic?
What will be an ideal response?
An example of a variable factor of production in the short run is
A) a building. B) capital equipment. C) an employee. D) land.
FICA, the tax that supports Medicare and Social Security, is generally:
A. proportional. B. progressive. C. regressive. D. a flat tax that adjusts with inflation.