According to purchasing-power parity, which of the following necessarily equals the ratio of the foreign price level divided by the domestic price level?
a. the real exchange rate, but not the nominal exchange rate
b. the nominal exchange rate, but not the real exchange rate
c. the real exchange rate and the nominal exchange rate
d. neither the real exchange rate nor the nominal exchange rate
b
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The gold standard established fixed exchange rates among all countries
a. True b. False Indicate whether the statement is true or false
When the price of a product rises for an inferior good, the:
A. Income and substitution effects will encourage consumers to purchase more of the product B. Income and substitution effects will encourage consumers to purchase less of the product C. Substitution effect will encourage consumers to purchase less of the product but the income effect will encourage them to purchase more D. Substitution effect will encourage consumers to purchase more of the product but the income effect will encourage them to purchase less