In order to assess the relationship between the real exchange rate and total exports for any nation, one must construct a real effective exchange rate that measures:
a. a composite of each trading partner's real exchange rate change weighted by the share of trade.
b. the exchange rate that would exist with no inflation and balanced trade.
c. the average of all nominal exchange rates since we assume no inflation.
d. nominal trade adjusted for inflation.
Ans: a. a composite of each trading partner's real exchange rate change weighted by the share of trade.
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A decrease in the price of eggs from $1.50 to $1.30 per dozen resulted in an increase in egg purchases in two cities
In Philadelphia, daily egg purchases increased from 6000 to 8000 dozens; in nearby Dover, Delaware, daily egg purchases increased from 300 to 400 dozens. The price elasticity of demand is therefore A) lower in the smaller city as would be expected. B) greater in the smaller city as would be expected. C) certainly affected by population differences in different markets. D) the same in Philadelphia as in Dover.
A tax that is structured so that people pay the same percentage of their income in taxes is called a(n):
a. flat tax. b. regressive tax. c. progressive tax. d. excise tax.