The answer to the question of whether or not a U.S. dollar will buy more in the U.S. or in a foreign country is determined by:
A. whether the nominal exchange rate is > or < than 1.
B. you cannot determine the answer until you travel to the foreign country and convert U.S. dollars to the foreign currency.
C. the real exchange rate.
D. the nominal exchange rate.
Answer: C
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A decrease in the federal funds rate
A) increases other short-term interest rates, decreases investment, and decreases aggregate demand. B) lowers the exchange rate, increases the supply of loanable funds, and increases aggregate demand. C) lowers other sort-term interest rate, raises the real interest rate, and increases aggregate demand. D) decreases the supply of loanable funds, raises the real interest rate, and decreases aggregate demand. E) decreases the demand for loanable funds, lowers the real interest rate, and decreases aggregate demand.
If the price of a slice of pizza falls from $2 to $1.5, a pizza-loving consumer will
A. spend more on soft drinks and less on pizza. B. see her purchasing power fall. C. substitute more Chinese food for pizza. D. see her purchasing power rise.
A supply schedule is determined by the wishes of
A. sellers. B. buyers. C. sellers and buyers. D. neither sellers or buyers.
Consumption expenditures include all of the following EXCEPT
A) going to a concert. B) having your house cleaned by Klean Maids. C) buying a pizza. D) purchasing a share of stock.