If the purchasing power of a dollar is less than the purchasing power of the Mexican peso, purchasing power parity would predict that
A) in the short run, the dollar will appreciate relative to the peso to equalize the purchasing power of the dollar and the peso.
B) in the short run, the dollar will depreciate relative to the peso to equalize the purchasing power of the dollar and the peso.
C) in the long run, the dollar will appreciate relative to the peso to equalize the purchasing power of the dollar and the peso.
D) in the long run, the dollar will depreciate relative to the peso to equalize the purchasing power of the dollar and the peso.
C
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Starting from long-run equilibrium, a large decrease in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; lower; potential B. expansionary; higher; potential C. recessionary; lower; potential D. recessionary; lower; lower
To maximize profit in the long run, a firm must
a. charge the highest price possible b. produce where demand is unit elastic c. sell the most output possible d. minimize the cost of producing any given amount of output e. produce at minimum long-run total cost
Which of the following budget items has generally declined as a percentage of GDP since 1960?
a. national defense spending b. Social Security spending c. Medicare spending d. Medicaid spending
When many banks choose to hold excess reserves, ______________ monetary policy may not work well.
a. tight b. free c. expansionary d. contractionary