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) 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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The above table shows the marginal benefit from submarines for the only two citizens of a country. Submarines are a public good. If submarines cost $100 a piece to produce, what is the efficient quantity of submarines?
A) 0 B) 1 C) 2 D) 3
The expectations theory and the segmented markets theory do not explain the facts very well, but they provide the groundwork for the most widely accepted theory of the term structure of interest rates
A) the Keynesian theory. B) the separable markets theory. C) the liquidity premium theory. D) the asset market approach.
By the year 2035, the percentage of the U.S. population over 65 years old is expected to: a. increase substantially. b. increase minimally. c. decrease minimally
d. decrease substantially.
Price discrimination refers to a system of pricing
a. based on buyer income rather than buyer demand conditions, so the poor pay more than the rich. b. that is always more profitable than simple "single-price" pricing. c. that forces customers who require more service to pay higher prices. d. where consumer groups with a more elastic demand for the product are charged lower prices.