If the opportunity cost is 2X = 1Y for country A and 1X = 3Y for country B, then a possible terms of trade is:
A) 1X = 1/3Y.
B) 1X = 1/4Y.
C) 1X = 1/5Y.
D) 1/2X = 1Y.
Ans: D) 1/2X = 1Y.
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According to the theory of purchasing power parity, if the inflation rate in England is greater than the inflation rate in Japan,
A) the law of one price has been violated. B) the nominal value of the pound will appreciate against the yen. C) the nominal value of the yen will appreciate against the pound. D) the nominal value of the pound will appreciate against the yen, but only if the two countries are on the gold standard.
Refer to the figure below.________ inflation will eventually move the economy pictured in the diagram from short-run equilibrium at point ________ to long-run equilibrium at point ________. 
A. Rising; A B. Falling; A; C C. Falling; B: C D. Rising; A; C