The demand for mansions is elastic because a small percentage change in price results in a large change in quantity demanded

Suppose that the price of a Big Mac is a good approximation of the price level in the country. A Big Mac costs £2 in London and $3 in New York

a) If purchasing power parity holds, what is the exchange rate between the U.S. dollar and the British pound? b) If the current exchange rate is $1.6 per pound, what is the dollar price of a Big Mac in London? What do you predict will happen to the exchange rate? Explain. c) The exchange rate between the U.S. dollar and the Russian ruble is 30 rubles per dollar. If purchasing power parity holds, what is the price of a Big Mac in Moscow?

How does contractionary monetary policy affect net exports in the short run?

A) Contractionary monetary policy reduces exports and increases imports. B) Contractionary monetary policy increases exports and reduces imports. C) Contractionary monetary policy increases exports and increases imports. D) Contractionary monetary policy reduces exports and reduces imports.