The purchasing power parity theory of exchange rate determination states that
a. in the short run, rates will adjust to parity.
b. in the long run, the rate reflects differences in price levels between the two countries.
c. in the long run, a government agency sets the rate at parity.
d. in the short run, the cost of labor really sets the exchange rate.
b
You might also like to view...
Use the following graph to answer the next question.
If the economy is currently in equilibrium at output level Q2, but full-employment output is at level Q1, which of the following fiscal policy actions would be the most effective at bringing the economy back to its full-employment output level?
A. Increase taxes and increase government purchases. B. Reduce government purchases and cut taxes. C. Cut taxes. D. Increase taxes.
Lucinda is deciding whether to enroll in an art school or a culinary school. The art school will cost $38,000 and the culinary school will cost $52,000
Lucinda estimates that the benefits from attending the art school will be $75,000 and the benefits from attending the culinary school will be $88,000. Based on these numbers, in which school should Lucinda enroll?
If the income multiplier is 2 and the equilibrium national income level is $8,000 billion, then a $500 billion decrease in aggregate expenditure will cause
a. the aggregate expenditure curve to shift to the right and national income to increase by $1,000 billion b. the aggregate expenditure curve to shift to the left and national income to decrease by $1,000 billion c. the aggregate expenditure curve to shift to the right and national income to increase by $2,000 billion d. the aggregate expenditure curve to remain unchanged but an upward movement along the curve that shows a $2,000 increase in national income e. the aggregate expenditure curve to remain unchanged but an upward movement along the curve that shows a $2,000 decrease in national income
In recent years, the Fed has chosen to target interest rates rather than the money supply because
a. Congress passed a law requiring them to do so. b. the President requested them to do so. c. the money supply is hard to measure with sufficient precision. d. changes in the interest rate change aggregate demand, but changes in the money supply do not.