If the theory of purchasing power parity is correct, which of the following statements should be true in the long run?
A) The percentage change in the nominal exchange rate equals the foreign inflation rate minus the domestic inflation rate.
B) The percentage change in the real exchange rate equals the foreign inflation rate plus the domestic inflation rate.
C) The percentage change in the nominal exchange rate equals the percentage change in the real exchange rate minus the sum of the foreign inflation rate and the domestic inflation rate.
D) The percentage change in the nominal exchange rate equals zero.
A
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The agreement between the United States, Mexico, and Canada that sought to lower trade barriers is known as
A) the General Agreement on Tariffs and Trade. B) the North American Free Trade Agreement. C) the World Trade Organization. D) the Smoot-Hawley Tariff Act. E) the New World Free Trade Agreement.
The market demand curve is derived by:
a. studying an individual's demand for a product over a year. b. comparing the monthly consumption of a group of people. c. surveying a set of consumers and ascertaining their preferences. d. adding up the quantities that consumers in a market are willing and able to purchase at each price. e. calculating the average price a random sample of consumers are willing to pay for a product.