What determines the real exchange rate and the nominal exchange rate in the short run?
What will be an ideal response?
The real exchange between the United States and Japan, RER, equals E ? P/P* where P is the U.S. price level, P* is the Japanese price level, and E is the nominal exchange rate in yen per dollar. In the short run, changes in the nominal exchange rate bring an equal change in the real exchange rate because the price levels in Japan and the United States do not adjust instantly to a change in the nominal exchange rate.
In the short run, the nominal U.S. exchange rate is determined in the foreign exchange market as the exchange rate that sets the quantity of U.S. dollars demanded equal to the quantity of U.S. dollars supplied.
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What is the relationship between government and coercion?
A) Government achieves its objectives exclusively through coercion. B) Government aims at minimizing the use of coercion in society. C) Government is generally granted the exclusive right to coerce adults. D) Only governments use coercion.
Refer to Figure 23-3. Suppose that investment spending decreases by $5 million, decreasing aggregate expenditure and decreasing real GDP from GDP2 to GDP1. If the MPC is 0.8, then what is the change in GDP?
A) -$4 million B) -$5 million C) -$25 million D) -$40 million