Describe how changes in tastes affect the value of a nation’s currency.
What will be an ideal response?
If consumer preferences for the products of a foreign nation change, then the demand for and supply of that country’s currency will change. If the demand for British clothing increases, then the demand for British pounds will increase causing the pound to appreciate. If the demand for British clothing declines, then the demand for British pounds will decrease causing the pound to depreciate. Conversely, if British preferences regarding some other country’s products change, then the supply of British pounds will change accordingly.
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The expansion of capital that can occur in the long-run but not, by definition, in the short-run, means that the long-run supply is
a. perfectly horizontal while the short-run supply curve is upward sloping. b. sloping downwards while the short-run supply curve is upward sloping. c. less elastic than the short-run supply curve. d. more elastic than the short-run supply curve.
Refer to the table below. As stated in the first row, the income of the consumer (1) equals $20. The price of good X (Px) equals $4.00, and the price of good Y (Py) equals $2.00. Total utility derived from consuming X and Y is listed. What combination of goods X and Y will maximize utility subject to the consumer's budget constraint?
The percentage change in one's real income can be approximated by:
A. The percentage change in price level divided by the percentage change in nominal income B. The percentage change in nominal income divided by the percentage change in price level C. The percentage change in price level minus the percentage change in nominal income D. The percentage change in nominal income minus the percentage change in the price level
The gravity model suggests that over time
A) trade between neighboring countries will increase. B) trade between all countries will increase. C) world trade will eventually be swallowed by a black hole. D) trade between Earth and other planets will become important. E) the value of trade between two countries will be proportional to the product of the two countries' GDP.