Using exchange rates based on purchasing power parity to compare per capita incomes in developing and developed countries might lead one to conclude that people in developing countries:
A. are worse off than if market exchange rates are used.
B. are no worse off than if market exchange rates are used.
C. are better off than if market exchange rates are used.
D. do not use markets enough to make such a comparison feasible.
Answer: C
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During an economic expansion, the demand for money ________ because ________
A) decreases; nominal GDP increases B) increases; real GDP increases C) increases; nominal GDP does not change D) does not change; people make more purchases with credit cards E) decreases; real GDP increases
Regarding short-range exchange rate movements, which of the following statements is NOT true?
a. they may vary from week to week b. they may vary from hour to hour c. are similar to those of the transaction demand determinants of long-term trends in exchange rates d. determined by arbitrage activity e. both a and b are false