What are the predictions of the PPP theory with regards to the real exchange rates?
What will be an ideal response?
The real exchange rate between two countries is a broad summary measure of the prices one country's goods and services relative to the other's. PPP predicts that the real exchange rate never permanently changes, which is different from nominal exchange rates that deals with the relative price of two currencies.
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During the 1990s positive technological change in the production of chicken caused the price of chicken to fall. Holding everything else constant, how would this affect the market for pork (a substitute for chicken)?
A) The demand for pork would decrease and the equilibrium price of pork would decrease. B) The demand for pork would decrease and the equilibrium price of pork would increase. C) The demand for pork would increase because consumers could afford to buy more chicken and pork. D) The supply of pork would increase and the equilibrium price of pork would decrease.
Sam has two jobs, one for the winter and one for the summer. In the winter, he works as a lift attendant at a ski resort where he earns $13 per hour. During the summer, he drives a tour bus around the ski resort, earning $11 per hour. If Sam takes fewer hours of leisure in the winter than in the summer, we can assume that his labor supply curve for the range of earnings in this example
a. is horizontal. b. is vertical. c. is upward sloping. d. has a backward-sloping portion.
The US Federal government is probably the ________ in the world.
A. riskiest lender. B. riskiest borrower. C. safest borrower. D. safest lender.
Which of the following is NOT a characteristic of a centrally planned economy?
A. Consumers vote with their dollars thus guiding resources to produce what the society wants. B. Government sets the prices. C. The government decides how much of each good should be produced. D. All of these statements are characteristics of centrally planned economy.