The idea that freely floating exchange rates equate the buying power of national currencies is called:
A. the equation of exchange.
B. the balance of payments.
C. Say's Law.
D. the purchasing power parity theory.
D. the purchasing power parity theory.
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The official settlements account records the change in ________
A) international trade B) U.S. official reserves C) foreign investment and domestic investment D) the reserves held by banks and the Fed
Explain how a change in the money supply can affect the following in the short run: a. The supply of loanable funds b. Real GDP c. The price level d. The expected inflation rate
According to the theory of rational expectations, a fully anticipated expansionary monetary policy will
(a) increase potential output (b) increase unemployment (c) have no impact on real output (d) promote the production of consumer goods over capital goods (e) result in deflation
Explain the concept of scale economies. Explain the difference between internal and external scale economies. What pattern of trade do we expect to see in industries with substantial external scale economies?
What will be an ideal response?