The PPP theory says that in the long run the exchange rate between two currencies should move toward __________ the cost in each country of an identical basket of internationally traded goods

Ray's Radios believed the synergies between radio production and battery production could be realized if he expanded. However, due to overseeing the battery expansion Ray devoted less time to the radio business leading to the radio unit costs increasing. At this point, Ray's Radios should

a. Increase production of the batteries b. Divest itself from the production of the batteries c. Shut down the production of the batteries d. None of the above

When there is a recessionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.

A. decline; lower; decline B. increase; raise; decline C. decline; lower; expand D. decline; raise; decline