If the US real exchange rate appreciates, US exports ()
A. increase and US imports decrease.
B. decrease and US imports increase.
C. and US imports both increase.
D. and US imports both decrease.
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An increase in the US government budget deficit shifts the ()
A. demand for loanable funds right and decreases investment spending.
B. supply of loanable funds right and increases investment spending.
C. supply of loanable funds left and decreases investment spending.
D. None of the above is correct.
If the US real exchange rate appreciates, US net exports ()
A. increase and US net capital outflow decreases.
B. decrease and US net capital outflow increases.
C. and US net capital outflow both increase.
D. and US net capital outflow both decrease.
Purchasing-power parity theory does not hold at all times because ()
A. many goods are not easily transported.
B. the same goods produced in different countries may be imperfect substitutes for each other.
C. Both a and b are correct.
D. prices are different across countries.
Imagine that a bushel of wheat costs $3.20 in the United States and costs 20 pesos in Mexico. If the nominal exchange rate is 10 pesos per dollar, the real exchange rate is ()
A. 1.60
B. 1.25
C. 0.625
D. None of the above is correct.