According to purchasing-power parity, what is the relationship between changes in price levels between two countries and changes in nominal exchange rates?
Purchasing-power parity asserts that the nominal exchange rate is equal to the foreign price level divided by the domestic price level. If the domestic price level rises more than the foreign price level, the domestic currency depreciates. If the foreign price level rises more than the domestic price level, the domestic currency appreciates.
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Assume that the central bank purchases government securities in the open market. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to the real risk-free interest rate and GDP Price Index in the context of the Three-Sector-Model?
a. The real risk-free interest rate falls, and GDP Price Index falls. b. The real risk-free interest rate falls, and GDP Price Index rises. c. The real risk-free interest rate rises, and GDP Price Index falls. d. There is not enough information to determine what happens to these two macroeconomic variables. e. The real risk-free interest rate and GDP Price Index remain the same.
In the long run, firms in a perfectly competitive market produce:
A. at a quantity with positive economic profits. B. where average variable costs are minimized. C. where MC is at its lowest point. D. where price equals marginal cost.
An improvement in managerial efficiency in a Fortune 500 corporation increases the marginal revenue product of all people working for the corporation. Assuming that the wage of workers who are hired in a competitive labor market remains constant, the company will
A. fire some workers. B. hire some workers. C. neither increase nor decrease the number of workers employed. D. shut down unless it can lower wages.
The iso-revenue curve will shift to the right
A) If the production possibilities curve expands. B) If the level of income increases. C) If the price of the two commodities increases. D) None of the above