If the same basket of goods costs $400 in the United States and 200 pounds in Britain, then according to the purchasing power parity theory,
a. goods and services must cost half as much in Britain as in the U.S.
b. the exchange rate should approach $2/pound
c. the exchange rate should approach $0.50/pound
d. goods and services must cost twice as much in Britain as in the U.S.
e. we cannot say anything about prices in the two countries unless we know the exchange rate
B
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Use the following data to calculate equilibrium real GDP: C= .75Y, I = $2 trillion, G=$1 trillion and NX = -$0.5 trillion
What will be an ideal response?
An increase in the supply of labor will, everything else equal,
a. increase the full-employment level of output b. decrease the full-employment level of output c. move the economy from a recession toward full employment d. reduce total employment e. have no impact on total employment