Privately formed cartels are legal in many countries, including the United States

China's State Council has encouraged more spending to "improve transportation links and other infrastructure...." It will also "step up its spending on vocational training and other educational programs for adults." www.nytimes

com, Keith Bradsher, October 19, 2008 Suppose that capital goods are on the vertical axis while consumption goods are on the horizontal axis of China's PPF. As a result of enacting the policies, China's PPF will A) shift outward. B) shift inward. C) rotate outward. D) become flatter.

If the exchange rate between the Canadian dollar and the Indian rupee (rupees per dollar) is greater than the relative purchasing power between the two countries, which of the following would be true?

A) There are opportunities for profit by purchasing goods in India and then selling them in Canada. B) Purchasing power parity predicts that the value of the dollar will rise as traders take advantage of arbitrage opportunities. C) Purchasing power parity predicts that the dollar is undervalued as traders take advantage of arbitrage opportunities. D) There are no arbitrage opportunities for which traders can take advantage.