The predictive accuracy of relative purchasing power parity improves if:
a. Both countries have highly mobile capital markets.
b. Both countries have central bank controls in place so that exchange rates change in an orderly manner.
c. Both countries under consideration have high growth rates.
d. Both countries are either developed or undeveloped (i.e., one is not developed and the other undeveloped).
e. You only are predicting the qualitative change in exchange rates and not the specific exchange rate or quantitative change in the exchange rate.
.E
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Nominal and real wage rates
A) must always change by the same amount. B) must always change in opposite directions by the same amount. C) must always change in the same direction but could change by different amounts. D) could change in opposite directions. E) must always change in the same direction, and the nominal wage rate must change more rapidly than the real wage rate.
If there is zero search cost, then in the presence of asymmetric information, competitive firms will
A) charge the monopoly price. B) charge the competitive price. C) charge zero price. D) shut down.