What is the limitation of using exchange rate-based measures as indicators of the standard of living across countries?
What will be an ideal response?
Exchange rates convert currencies into the same units but fail to account for the fact that the prices of many goods and services differ across countries. Fluctuations in exchange rates have little to do with changes in prices in different countries and are unable to account for the differences in cost of living. Therefore, if exchange rates are used to compare the income per capita of different countries, there is a possibility that the income per capita of a country will be overestimated.
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In order to impact aggregate demand and the economy, the Fed needs to be able to influence:
A. every measure of the money supply. B. MB only. C. MB and M1 D. M1 and M2.
Suppose two people with the same level of income and wealth have different discount rates. Joe has a very high discount rate and Jim has a very low discount rate. Which one of the following is TRUE?
A) Joe is more likely to borrow than Jim. B) Joe is less likely to borrow than Jim. C) Joe and Jim will borrow the same amount. D) Neither Joe nor Jim would be borrowers.