The purchasing power parity theory is not a good explanation of how nominal exchange rates are determined in the short run because:
A. there is no evidence that low inflation is associated with less rapid nominal exchange rate depreciation.
B. most goods and services are traded internationally and are standardized.
C. most nominal exchange rates are fixed and foreign exchange markets do not bring the supply and demand for currencies into equilibrium.
D. many goods and services are not traded internationally and not all internationally-traded goods are standardized.
Answer: D
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The main disadvantage of an emissions tax is that
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Keeping an extra $200 in your checking account to pay for possible car repairs illustrates the
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