Suppose purchasing power parity holds. If the price level in the United States is 100 dollars per good and the price level in Japan is 250 yen per good, then the nominal exchange rate is ________ yen per dollar.
A. 0.25
B. 2.5
C. 0.4
D. 4.0
Answer: B
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What will be an ideal response?
According to the quantity theory of money, a 25 percent change in M, the quantity of money, leads to a 25 percent change in
A) V, the velocity of circulation. B) P, the price level. C) Y, real GDP. D) R, the interest rate.
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An economy that has a domestic and a foreign sector is called:
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