As long as trade across borders is unrestricted and exchange rates adjust freely, the purchasing power parity theory predicts that the exchange rate between two national currencies will adjust in the
a. short run because of the actions of arbitrageurs
b. long run to reflect differences in the nations' price levels
c. long run to reflect changes in the governments' trade policies
d. short run because of the actions of speculators
e. long run to reflect differences in military power
B
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If two goods were to become even stronger substitutes than before, an economist would expect the cross elasticity to become:
a. positive. b. one. c. zero. d. smaller. e. larger.
What happened to the so-called Asian tigers in the 1960s and 1970s?
a. They underwent a period in which their economies turned into mild communism. b. The literacy rates of these countries declined in this time period (that is, a smaller percentage of the people could read). c. They all became part of the First World. d. They became the most technologically advanced countries in the world. e. They underwent the process of opening their economies and experienced rapid economic growth.