Question 7(1 point)

Calculate the relative price q^g_US/EURof a price of designer jeans if they cost 45 in Europe, $50 in the US, and the exchange rate E_$/is 1.2.

Your Answer:

Question 7 options:

Answer

Question 8(1 point)

The evidence shows that relative PPP _____.

Question 8 options:

doesn't holds up much at all in the long run or the short run.

holds up reasonably well in the short run, but not in the long run.

holds up very well in the long run and the short run.

holds up reasonably well in the long run, but not in the short run.

Question 9(1 point)

Relative PPP says that, in the long run, _____.

Question 9 options:

the depreciation of a country A's currency relative to country B's currency is equal to country A's inflation rate minus country B's GDP growth rate.

the depreciation of a country A's currency relative to country B's currency is equal to country A's inflation rate plus country B's inflation rate.

the depreciation of a country A's currency relative to country B's currency is equal to country A's inflation rate minus country B's inflation rate.

the depreciation of a country A's currency relative to country B's currency is equal to country B's inflation rate minus country A's inflation rate.

Question 10(1 point)

Suppose country W only produces one type of good (widgets) and produced the same number of widgets in 2018 and 2019. All money in country W is cold, hard cash. Suppose that, in every year, each unit of currency was spent four times per year on average, but that the nominal GDP of country W increased by 9% from 2018 to 2019. This must mean that the money supply of country W increased by ____ percent from 2018 to 2019. Do not include the percent sign in your answer

Your Answer:

Question 10 options:

Answer

Question 11(1 point)

What is true if absolute PPP holds between the US and Canada?

(Note that USD refers to US dollars while CAD refers to Canadian dollars)

Question 11 options:

The nominal exchange rate of USD per CAD equals the US price level divided by the Canadian price level, and the real exchange rate is less than one.

The nominal exchange rate of USD per CAD equals the US price level divided by the Canadian price level, and the real exchange rate is greater than one.

The nominal exchange rate of USD per CAD equals the Canadian price level divided by the US price level, and the real exchange rate is equal to one.

The nominal exchange rate of USD per CAD equals the US price level divided by the Canadian price level, and the real exchange rate is equal to one.

Question 12(1 point)

Suppose money supply growth rates and real GDP growth rates have been chugging along in the US and Canada at 1% per year for a long time, when suddenly, the real GDP growth rate in Canada increases to 4%. What will happen, according to the monetary model?

Question 12 options:

The US dollar will depreciate by 3% relative to the Canadian dollar

The US dollar will appreciate by 3% relative to the Canadian dollar

The US dollar will depreciate by 4% relative to the Canadian dollar

The US dollar will appreciate by 4% relative to the Canadian dollar

Question 13(1 point)

If price levels in China and the US do not change, but the exchange rate is decreased so that it takes fewer dollars to buy one Chinese yuan than before (in other words, E_$/decreases), what will happen to the real exchange rate (where US is considered the home country)?

Question 13 options:

It falls and the US has experienced a real appreciation

It falls and the US has experienced a real depreciation

It rises and the US has experienced a real appreciation

It rises and the US has experienced a real depreciation

Question 14(1 point)

If LOOP holds for all goods, absolute PPP must hold.

Question 14 options:

TrueFalse

Question 15(1 point)

Saved

If the law of one price applies to ounces of silver, then the ratio of the price of an ounce of silver in Chicago (which is quoted in dollars) to the price of an ounce of silver in London (which is quoted in ) will equal ______.

(If you actually look this up on the internet, you should be pleasantly surprised with how close it is to following LOOP. This parenthetical comment should not affect the question, it's just an interesting side note.)

Question 15 options:

the number of ounces per pound

the inverse exchange rate E_/$

the exchange rate E_$/

the conversion to the metric system

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