Explain the theory of purchasing power parity
What will be an ideal response?
The theory of purchasing power parity suggests that market exchange rates simply reflect differences in the overall price levels between countries. Research has shown that it does not hold precisely, and it does not give accurate predictions for exchange rates. The reason for this is that many goods are not traded across countries.
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If the executives of the U.S. silicon-chip industry lobby Congress for protection from imports on the grounds that theirs is a new industry that needs time to develop technological efficiency, they are using the:
A) environmental standards argument. B) infant industry argument. C) cheap foreign labor argument. D) national security argument.
Until the beginning of the 20th century, the overriding and chronic money problem the United States faced was
a. an overreaching and politically controlled Federal Reserve System b. an inability to persuade the Treasury to make open market operations c. the banks' inclination to overissue currency d. the inability of the Federal Open Market Committee to agree among themselves on policy issues e. the linking of fiscal and monetary policy by the central bank