Under the purchasing-power-parity theory, if a certain market basket of identical goods costs $7,000 in the United States and 140,000 pesos in Mexico, the exchange rate should be ______.
a. $1 to 20 pesos
b. $20 to 20 pesos
c. $1 to 2 pesos
d. $1 to 1 peso
a. $1 to 20 pesos
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Suppose the velocity of money is not fixed, but stable at about 4% growth per year
How could the quantity theory of money be modified to include a stable growth rate of the velocity of money? In this modified version with velocity growing at about 4% per year, what would the growth rate of the other variables need to be to cause inflation?
Fixed costs are
a. costs that vary with output b. equal marginal costs c. costs that do not vary with output d. equal to total costs
An inferior good is
a. any good of low quality b. one that consumers buy less of at a higher price c. one that consumers buy less of as their income rises d. one that has few substitutes e. any good made with inexpensive labor
Black-market prices are below equilibrium prices because sellers want to sell large quantities
a. True b. False Indicate whether the statement is true or false