Relative PPP indicates that
A) the exchange rate between any two currencies is equal to the ratio of their price indexes.
B) the same good sells for the same price internationally.
C) the percentage change in the exchange rate is equal to the inflation differential between the domestic and foreign country.
D) relative prices determine exchange rates.
Question 2 - Suppose that a country experiences growth strongly biased toward its export, cloth
A) this will tend to worsen the country's terms of trade.
B) this will tend to improve the country's terms of trade.
C) this will tend to leave the country's terms of trade unchanged.
D) this will tend to worsen the terms of trade for the country's trading partner.
E) this will increase the price of cloth relative to the imported good.
Question 3 - Explain why indifference curves have the following properties: (a) downward slope (b) convex to the origin (c) higher curves reflect higher utility (d) non-intersecting
What will be an ideal response?
Question 4 - ________ is said to exist when the formation of a regional trading group leads to an expansion of trade above pre-group levels.
A) Trade creation
B) Trade diversion
C) Trade exclusion
D) Trade distortion
Question 5 - When the production possibility frontier shifts out relatively more in one direction, we have
A) biased growth.
B) unbiased growth.
C) immiserizing growth.
D) balanced growth.
E) imbalanced growth.
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