If the purchasing power of a dollar is greater than the purchasing power of the yen, purchasing power parity would predict that
A) in the short run, interest rates will move to equalize the purchasing power of the dollar and the yen.
B) in the long run, exchange rates will move to equalize the purchasing power of the dollar and the yen.
C) in the short run, exchange rates will move to equalize the purchasing power of the dollar and the yen.
D) in the long run, interest rates will move to equalize the purchasing power of the dollar and the yen.
B
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If the two firms each hire the same amounts of capital and labor, compare the two firms in terms of APL and MPL.
If the nominal interest rate is 5 percent and there is a deflation rate of 3 percent, what is the real interest rate?
a. 8 percent b. 2 percent c. 15 percent d. 1.7 percent