If the exchange rate between the U.S. dollar and the Mexican peso (pesos per dollar) is less than the relative purchasing power between the two countries, which of the following would be true?
A) Purchasing power parity predicts that the dollar is overvalued as traders take advantage of arbitrage opportunities.
B) Purchasing power parity predicts that the value of the dollar will fall as traders take advantage of arbitrage opportunities.
C) There are opportunities for profit by purchasing goods in the United States and then selling them in Mexico.
D) There are no arbitrage opportunities for which traders can take advantage.
C
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According to economists, one of the signs of an unhealthy economy is a(n)
a. rising labor productivity. b. increasing real GDP. c. declining real GDP. d. declining unemployment.
Figure 4-19
After a strike against the Financial News in London began, the number of copies of the competing Broad Street Journal sold in England increased dramatically, yet there was no increase in price. Which supply and demand graph in Figure 4-19 represents the situation for the Broad Street Journal before the strike started?
a.
1
b.
2
c.
3
d.
4