Does the existence of non-tradable goods allow for deviations from Purchasing power Parity?
What will be an ideal response?
Yes, the existence of nontradables allows deviations from PPP. This is because the price of a nontradable is determined entirely by its domestic supply and demand curves, and in turn fluctuations in demand and supply for these good will affect the price level. Examples include housing, haircut, services etc.
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An increase in the amount of resources would shift the long-run aggregate supply curve:
A) rightward. B) leftward. C) no shift. D) none of the above.
A firm uses two factors of production. Irrespective of how much of each factor is used, both factors always have positive marginal products which imply that
A) isoquants are relevant only in the long run B) isoquants have negative slope C) isoquants are convex D) isoquants can become vertical or horizontal E) none of the above