What is the limitation of using exchange rate-based measures as indicators of the standard of living across countries?
What will be an ideal response?
Exchange rates convert currencies into the same units but fail to account for the fact that the prices of many goods and services differ across countries. Fluctuations in exchange rates have little to do with changes in prices in different countries and are unable to account for the differences in cost of living. Therefore, if exchange rates are used to compare the income per capita of different countries, there is a possibility that the income per capita of a country will be overestimated.
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Private costs are
A) external costs borne by private firms. B) explicit costs rather than implicit costs. C) costs borne by private members of society rather than governmental bodies. D) costs borne solely by the individuals who incur them.
By how much does the real, bilateral exchange rate change when the nominal, bilateral exchange rate changes from $1.40/£ to $1.60/£, the U.S. tradable basket from $2,100 to $2,200 and the British tradable basket from £1,500 to £1,600?
a. The real exchange rate rises by 16.35%. b. The real exchange rate falls by 3.1% c. The real exchange rate rises by 3.1% d. The real exchange rate falls by 10.8% e. The real exchange rate falls by 12.5%
Use the figure below to answer the following question.
What area represents deadweight loss after the government imposes the excise tax on the market?
A. triangle abc B. square $13ac$9 C. triangle $21a$13 D. triangle $1c$9
At a price of $20 each, the demand for t-shirts from a group's fundraising activity is unit elastic. Thus, the group's total revenue from selling t-shirts ________ at a price of $20 each.
A. will equal $0 B. reaches its maximum C. will equal $1 D. reaches its minimum