Which of the following statements is true about purchasing power parity (PPP)?
a. PPP is the normal state between two nations because international markets are perfectly competitive.
b. PPP is the normal state between two nations because of government regulations and central bank intervention.
c. PPP is the normal state between two nations because interest rates, the spot exchange rate, and the forward exchange rate all adjust to create this condition.
d. PPP is the normal state between two nations because arbitrageurs take advantage of any imbalances.
e. PPP is rarely the case for most nations in the short-run, but exchange rates tend to move in the direction of PPP in the long run.
.E
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The long-run supply curve of a firm is:
A) its marginal cost curve. B) its average total cost curve. C) the portion of its marginal cost curve that lies above its average total cost curve. D) the portion of its marginal cost curve that lies below its average total cost curve.
One of describing the debate between activists and non-activists is that
A) activists are pessimistic about the self-correcting powers of the economy but non-activists are optimistic. B) activists tend to be oriented to the long-run but non-activists are short-run oriented. C) non-activists are optimistic about the efficacy of stabilization policy but activists are pessimistic. D) A and B are both correct.