Transactions costs prevent purchasing power parity from holding because:
A. they make creating exchanges too costly in some places.
B. they include the expense of transporting the goods to be sold in another country.
C. the price of a good sold in another country must include the cost of getting it there, which can be high and cause a large price differential.
D. All of these statements are true.
D. All of these statements are true.
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The quantity of loanable funds supplied increases if the real interest rate rises, all other things remaining the same, because the
A) real interest rate is the opportunity cost of saving. B) real interest rate is inversely related to the cost of buying on credit. C) real interest rate is the opportunity cost of consumption. D) cost of living is determined by the real interest rate. E) demand for investment increases when the real interest rate rises.
A fall in import prices or an increase in productivity ________
A) constitute a positive supply shock B) typically leads to a rise in commodity prices C) typically comes with a reduction in output D) all of the above E) none of the above
The current world exchange rate system is usually described as an adjustable peg system.
Answer the following statement true (T) or false (F)
If a consumer doubles her quantity of ice cream consumed when her income rises by 25%, then her income elasticity of demand for ice cream is
A) 8.0. B) 4.0. C) .25. D) .08.