Purchasing power parity is the theory that nominal exchange rates are determined:
A. by real exchange rates.
B. as necessary for the law of one price to hold.
C. by the forces of supply and demand.
D. as necessary to achieve the fundamental value of the exchange rate.
Answer: B
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The only two firms in a market are trying to decide what price to charge. The payoff matrix for this duopoly game is shown above. The payoffs are thousands of dollars of economic profit. In the above game, in the Nash equilibrium,
A) Firm A and Firm B are both making $40,000 in economic profit. B) Firm A and Firm B are both making $55,000 in economic profit. C) Firm A is making $60,000 and Firm B is making $55,000 in economic profit. D) Firm A and Firm B are both making $60,000 in economic profit. E) Firm A and Firm B are both making $35,000 in economic profit.
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In the balance of payments accounts, a net importer of capital is a nation that
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In a market where the tragedy of the commons arises, the equilibrium quantity is both individually ________ and collectively ________.
A. inefficient; rational B. irrational; efficient C. rational; inefficient D. efficient; irrational