Explain the theory of purchasing power parity
What will be an ideal response?
The theory of purchasing power parity suggests that market exchange rates simply reflect differences in the overall price levels between countries. Research has shown that it does not hold precisely, and it does not give accurate predictions for exchange rates. The reason for this is that many goods are not traded across countries.
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Which of the following is a NOT a tool the Fed uses to change the money supply?
a. The tax rate b. The reserve ratio c. Open market operations d. The discount ratee
If a 10 percent increase in income results in an 8 percent increase in the quantity demanded of a good, the income elasticity of demand equals ________ and the good is ________ good
A) 0.80; an inferior B) 1.2; a normal C) 0.80; a normal D) -1.2; an inferior
A decrease in the price of inputs will cause the supply curve for a product to shift to the right
Indicate whether the statement is true or false
Who benefits primarily from rent controls?
A) construction workers B) poor people looking for low-income housing C) all who want to rent D) only renters who are able to get units at below-market rates