Suppose Amber Crombie and her husband Fitch spend $1400 this year on healthcare and medicines for the chronic nasal congestion they suffer living next to smelly Lake Lillypad. How does their expenditure affect GDP?
A) It doesn't affect GDP at all.
B) GDP would decrease by $1400.
C) GDP would increase by $1400.
D) GDP would increase by $1400 only if the healthcare and medicines cured their chronic nasal congestion; if it remains uncured, then GDP would remain unchanged.
C
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The purchasing power parity theory predicts better in the __________ run, and when there __________ in inflation rates across countries
A) long; is little difference B) short; are large differences C) long; are large differences D) short; is little difference
Suppose the current exchange rate between the U.S. dollar and the Mexican peso is $0.12 = 1 peso. Furthermore, suppose the price level in Mexico rises 25 percent while the U.S. price level remains constant. According to the purchasing power parity theory, what will be the equilibrium exchange rate?
A) $0.15 = 1 peso B) $0.09 = 1 peso C) $0.16 = 1 peso D) $0.096 = 1 peso