What is the law of one price?
What will be an ideal response?
The law of one price is the theory that goods which are easily tradeable across countries should sell at the same price when expressed in a common currency.
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Which of the following represents a way in which multinational corporations can protect themselves from exchange rate risks?
A) forward markets B) futures markets C) currency options D) All of the above
The aggregate demand curve shifts left if either
a. speculators gain confidence in U.S. assets or foreign countries enter into recession. b. speculators gain confidence in U.S. assets or recessions in foreign countries end. c. speculators lose confidence in U.S. assets or foreign countries enter into recession. d. speculators lose confidence in U.S. assets or recessions in foreign countries end.
What can we conclude about the endogeneity of an explanatory variable if the OLS and 2SLS estimates are significantly different? Assume that the instrument used was exogenous.
A. The explanatory variable is not endogenous and therefore using 2SLS is ill-advised. B. The explanatory variable is not endogenous and therefore OLS should not be used. C. The explanatory variable is endogenous and therefore using 2SLS should be considered. D. The explanatory variable is endogenous and therefore OLS should be used.
If losses are being made in a perfectly competitive industry, in the long run industry supply will ______ and market price will ________.
A. rise; rise B. fall; fall C. fall; rise D. rise; fall