Find the real exchange rate for the following case: Assume that the representative basket of European goods costs 100 euros and the representative U.S. basket costs $125,
and the dollar/euro exchange rate is $0.75 per euro, then the price of the European basket in terms of U.S. basket is:
[(0.75 $/euro) (100 euro per a European basket)]/[(125 $/U.S. basket)] = 0.60 U.S. baskets/European basket.
Economics
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Suppose that a consumer has a marginal propensity to consume of 0.8. If this consumer receives an extra €2 of disposable income, her saving would be expected to increase by
A. €0.40. B. €0.80. C. €1.20. D. €1.60.
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The law of one price should hold well for
A) differentiated products. B) any individual goods traded internationally. C) homogeneous goods. D) All of the above.
Economics