The reason relative purchasing power parity (RPPP) is better at predicting exchange rates than absolute purchasing power parity (APPP) is because:
a. Actually, it is the other way around. APPP has been shown empirically and theoretically to be a more accurate way to predict exchange rates.
b. APPP deals only with countries that have some sort of imbalance like hyperinflation. RPPP deals with any and all countries, which makes the job of predicting exchange rates easier.
c. APPP has to begin and end in parity. RPPP just requires that the initial disequilibrium remain the same.
d. APPP predictions are often biased because of central bank controls, sticky prices, and protectionism. RPPP can abstract from these problems.
.C
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Typically, the greater the specialization of resources
A) the less production that takes place. B) the greater the bow of the production possibilities curve. C) the poorer the country becomes. D) the greater the unemployment in the country.
Which of the following is an illustration of the law of increasing opportunity costs?
A) As more cars are produced, the opportunity cost of each additional car is greater than for the preceding unit. B) As more cars are produced, the opportunity cost of each additional car is less than for the preceding unit. C) As more cars are produced, the opportunity cost of each additional car is the same as for the preceding unit. D) People pay lower prices for cars the higher the costs of producing cars.