In the short run, there are large and persistent deviations between actual exchange rates and exchange rates predicted using purchasing power parity because of:
a. Discretionary monetary policy.
b. International capital flows could cause short-term differences.
c. Discretionary fiscal policy.
d. Widely different inflation rates in the two nations.
e. None of the above.
.B
You might also like to view...
Here's what we know about last year's weekly demand for 2-night DVD rentals in the Village of Harmony: When P = $3, Qd = 100; at P = $5, Qd = 75; and when P = $7, Qd = 50. This year the village population has increased by 25%
What impact is this most likely to have? A) Each individual's demand for DVD rentals will increase. B) Each individual's demand curve for DVD rentals will shift to the left. C) The market demand curve for DVD rentals shifts left. D) The market demand for DVD rentals increases.
If Coke and Pepsi are close substitutes, then if:
a. Coke raises its price, so will Pepsi. b. Coke raises its price, it will not lose customers to Pepsi. c. Pepsi lowers its price, it will not hurt Coke. d. Pepsi lowers its price, so will Coke. e. Coke raises its price, some customers will switch to Pepsi.
If the price in Canada was C$50 and the price in Switzerland was SFr 100, absolute purchasing power parity would indicate that:
a. The nominal value of the Swiss franc should rise by 100%. b. The nominal exchange rate should be equal to C$2/SFr. c. The nominal value of the Canadian dollar should rise by 100%. d. The nominal exchange rate should be equal to C$0.50/SFr. e. None of the above.
Situation 33-1 Suppose that the equation that represents the expected benefits of burglary for a given prospective criminal is as follows: EB = Ps x Loot The criminal's cost equation is as follows: EC = [Pp x (I + F)] + AC Where: EB is the expected benefits of burglary Ps is the probability of successfully burglarizing a house Loot is the dollar take from the burglary EC is the expected costs of
burglary Pp is the probability of imprisonment I is the income the criminal gives up if caught and imprisoned F is the dollar value the criminal puts on freedom AC is the anguish cost of committing a burglary Refer to Situation 33-1. If the prospective criminal sets the following values: Ps = 50 percent Loot = $30,000 Pp = 10 percent I = $10,000 F = $25,000 AC = $5,000 The prospective criminal's expected benefit from committing the burglary is ______________ and his expected cost of committing the burglary is _______________. Economic theory tells us that under these circumstances, the prospective criminal ______________ commit the burglary. A) $15,000; $8,500; will B) $15,000; $8,500; will not C) $15,000; $40,000; will not D) $17,500; $12,000; will