What does purchasing-power parity imply about the real exchange rate? Explain what this means
That it is equal to one. The number of dollars it takes to buy goods in the U.S.buys enough foreign currency to buy the same amount of goods in a foreign country.
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The substitution effect indicates that a profit-seeking firm will use:
A. more of an input whose price has fallen and less of other inputs in producing a given output. B. more of all inputs if production costs fall. C. more of those inputs whose marginal productivity is the greatest. D. less of an input whose price has fallen and more of other inputs in producing a given output.
When a consumer's willingness to buy a good or service is influenced by the number of people who have purchased that good or service, this is called
A. an advertising gimmick. B. a network effect. C. a switching cost. D. an opportunity cost.