According to the law of one price, if the price of Colombian coffee is 100 Colombian pesos per pound and the price of Brazilian coffee is 4 Brazilian reals per pound, then the exchange rate between the Colombian peso and the Brazilian real is
A) 40 pesos per real.
B) 100 pesos per real.
C) 25 pesos per real.
D) 0.4 pesos per real.
C
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One advantage of a floating exchange rate system compared to a fixed or managed float exchange rate system is
A) it is easier for central banks to control inflation. B) there is no need for government intervention. C) it allows greater exchange rate stability. D) it eliminates the possibility of depreciation during a recession.
Inflation is defined as the sustained increase in relative prices
a. True b. False Indicate whether the statement is true or false
Is peak pricing economically efficient? Explain. Give an example to illustrate your answer.
What will be an ideal response?
Show, using a supply and demand diagram, why we would expect a stronger economy to result in higher interest rates.
What will be an ideal response?