Is PPP a theory of exchange rate determination? Explain why or why not?
What will be an ideal response?
PPP is not a theory of exchange rate determination. It describes an equilibrium relationship between two endogenous variables—prices and exchange rates. As such, the PPP relationship should be viewed as a short-cut rather than a substitute for a complete determination of prices and exchange rates. Its main usefulness is in providing a guide to the general trend of exchange rates rather than day-to-day fluctuations.
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A. acquiring new human capital B. research and development into new technologies C. physical capital formation D. additional hours of leisure
Use the following table to answer the next question. The base year is 2007. Hot DogsBaseballsBottles of SodaYearPriceQuantityPriceQuantityPriceQuantity2005$2.00100$5.0050$2.0010020064.001005.001002.0015020076.001005.001002.0020020088.001508.002004.00200200910.0020010.002004.00250Real GDP (constant dollars) for 2005 equals ________.
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a. c and e. b. d and e. c. depreciated. d. appreciated. e. helped U.S. exporters.
Consider the statement: "When the British government tripled university fees for foreign students in Great Britain, about one-half of them left to study in other countries." This move will ________ university revenues from foreign students in Great Britain.
A. not change B. increase C. decrease D. cannot determine without further information