Consider gardening books. What will happen to the market for these books as gardening becomes more popular and simultaneously printing costs increase?
A) The price of gardening books definitely increases.
B) The quantity of gardening books definitely increases.
C) The price of gardening books might increase or decrease.
D) The quantity of gardening books definitely stays the same.
A
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Purchasing power parity's assumption that the real exchange is constant
A) is correct in nearly all instances. B) would be correct were it not for the existence of trade barriers. C) is not reasonable. D) is correct for trade between the United States and Japan, but incorrect in most other bilateral trading relations.
If the dollar buys less cotton in Egypt than in the United States, then traders could make a profit by
a. buying cotton in the United States and selling it in Egypt, which would tend to raise the price of cotton in the United States. b. buying cotton in the United States and selling it in Egypt, which would tend to raise the price of cotton in Egypt. c. buying cotton in Egypt and selling it in the United States, which would tend to raise the price of cotton in Egypt. d. buying cotton in Egypt and selling it in the United States, which would tend to raise the price of cotton in the United States.