Explain Purchasing Power Parity
What will be an ideal response?
PPP states that the exchange rate between two countries' currencies equals the ratio of the countries' price levels.
A fall in a currency's domestic purchasing power (i.e. an increase in the domestic price level) will be associated with a proportional currency depreciation in the foreign exchange market and vice versa.
= PUS/PE where P is the price of a reference commodity basket.
Rearrange: PUS = × (PE)
Thus, PPP asserts that all countries' price levels are equal when measured in terms of the same currency.
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A) traditional Keynesian theory B) new Keynesian theory C) real business cycle theory D) traditional and new Keynesian theory
There are a number of reasons why labor supply curves will shift in a particular industry. Which one of the following is NOT one of them?
A. There is a change in the market wage rate. B. Taxes on labor affect the labor supply curve. C. job flexibility that determines the position of the labor supply curve D. Changes in working conditions in an industry affect the labor supply curve.
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What will be an ideal response?