Explain why economists do not use exchange rates to compare standards of living across countries. Also, discuss what economists do to avoid these problems
What will be an ideal response?
Answers should include discussions about the effects of variations in exchange rates and of systematic differences in prices across countries. The use of PPP numbers reduces the problems associated with these two issues.
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Government deficits tend to increase during
A) periods of war and recession. B) periods of below- or above-average growth. C) periods of increased financial uncertainty. D) recessions and booms.
One reason for computing the logarithms (ln), or changes in logarithms, of economic time series is that
A) numbers often get very large. B) economic variables are hardly ever negative. C) they often exhibit growth that is approximately exponential. D) natural logarithms are easier to work with than base 10 logarithms.
Recently, Chrysler bonds with a face value of $100 closed at $103. The coupon rate was 12.75 percent. The current yield on these bonds was
A. 103 percent. B. 3 percent. C. 12.75 percent. D. less than 12.75 percent.
The rate of unemployment that occurs when the economy is producing its potential GDP _____
a. is called the natural rate of unemployment b. is zero c. is thought to be approximately 10% d. can be kept at zero through fiscal policy e. is equal to the rate of stagflation in most years