"Fluctuations in exchange rates, other things remaining the same, creates a situation in which money buys the same amount of goods and services in different currencies
" What does the previous statement describe? Will these fluctuations occur in the short run or the long run?
The statement describes purchasing power parity, the proposition that money will buy the same amount of goods and services in different currencies. The effects of purchasing power parity will change the exchange rate in the long run. In the short run, deviations from purchasing power parity can occur.
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An increase in the demand for American-made goods will
A) decrease the supply of dollars on the foreign exchange market. B) decrease the demand for dollars on the foreign exchange market. C) increase the demand for dollars on the foreign exchange market. D) increase the supply of dollars on the foreign exchange market.
Explain the permanent-income hypothesis and the life-cycle hypothesis. How are these hypotheses similar?
What will be an ideal response?
When the law of diminishing returns takes effect
A) firms must add increasingly more input if they are to maintain the same extra amount of output. B) firms must add decreasingly more input if they are to maintain the same extra amount of output. C) more input must be added in order to increase its output. D) a firm must always try to add the same amount of input to the production process.
In Figure 11-9, which of the following is true?
A. MC = P. B. MC = MR. C. MU > MR. D. MU < MC.