Suppose the U.S. inflation rate falls while the inflation rate among the members of the European Monetary Union (EMU) holds constant. Other things equal, what will happen in the balance of payments accounts?
What will be an ideal response?
The lower inflation rate in the U.S. relative to the EMU makes U.S. goods and services a little cheaper, increasing exports and decreasing imports. The current account balance will improve.
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In 2001, Pablo earned $200 per week at his job. In 2011, Pablo earned $240 per week. If the CPI in 2001 was 100 and the CPI in 2011 was 152, then
A) Pablo was better off in 2011 because his weekly wage was higher. B) the 2001 wage measured in 2011 dollars is $157.89. C) the 2011 wage measured in 2001 dollars is $157.89. D) the 2001 wage measured in 2011 dollars is $131.58. E) the 2001 wage measured in 2011 dollars is $100.
Brand names are an example of
A) economies of scale. B) product differentiation. C) oligopoly. D) illegal barriers to entry.