Figure 5-11
In Figure 5-11, a consumer is initially at point A. There is a price change and she moves to B. It follows that
a.
the demand for beer follows the law of demand.
b.
the demand for beer does not follow the law of demand.
c.
wine is an inferior good.
d.
the consumer is confused.
b
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When the ratio of domestic prices to foreign prices falls:
A) the real exchange rate depreciates only when the nominal exchange rate depreciates. B) the real exchange rate depreciates even when the nominal exchange rate is constant. C) the real exchange rate appreciates. D) the real exchange rate depreciates only when the nominal exchange rate appreciates.
Net capital outflows ________
A) are also known as net foreign investment B) are positive if saving is greater than investment C) are also known as the trade balance D) all of the above E) none of the above