Suppose you put $1,000 aside for a vacation in Mexico. On your flight to Cancun, the passenger seated next to you says: "Did you hear the good news? We can do and buy more on our vaction now.". You ponder the comment and say to yourself:
a. "I bet there's a new tariff on American goods.".
b. "I bet there's a new tariff on Mexican goods.".
c. "Perhaps the exchange rate, dollars per peso, increased.".
d. "Perhaps the exchange rate, pesos per dollar, increased.".
e. "Perhaps the exchange rate, pesos per dollar, decreased.".
D
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Increases in the price level will
A) raise consumption because some goods and services are more affordable. B) raise consumption because real wealth increases. C) lower consumption because real wealth decreases. D) lower consumption because goods and services are less affordable.
Refer to Table 10.1. Suppose that all of the information given in the Table remains the same except that taxes increase by $1.0 billion and transfers increase by $1.5 billion. Equilibrium real GDP for this economy is equal to
A) $6.25 billion. B) $17 billion. C) $25 billion. D) $47 billion.