This topic contains a solution. Click here to go to the answer

Author Question: Suppose that over the past decade, U.S. inflation is greater than that in Mexico. Further assume ... (Read 39 times)

luminitza

  • Hero Member
  • *****
  • Posts: 555
Suppose that over the past decade, U.S. inflation is greater than that in Mexico. Further assume that during this same period, the dollar appreciates relative to the Mexican peso. Given this information,
 
  A) the real exchange rate remains unchanged.
  B) the real exchange rate must decrease.
  C) the real exchange rate must increase.
  D) the real exchange rate can increase or remain the same, but not decrease.
  E) the real exchange rate can decrease or remain the same, but not increase.

Question 2

Explain what effect an increase in the unemployment rate will have on the real wage based on: (1 ) the WS relation; and (2 ) the PS relation.
 
  What will be an ideal response?



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

Hikerman221

  • Sr. Member
  • ****
  • Posts: 346
Answer to Question 1

C

Answer to Question 2

An increase in the unemployment rate will decrease bargaining power, decrease the nominal wage, and therefore decrease the real wage based on wage setting behavior. Changes in the unemployment rate have no effect on the real wage based on price setting behavior.




luminitza

  • Member
  • Posts: 555
Reply 2 on: Jun 30, 2018
Gracias!


alvinum

  • Member
  • Posts: 317
Reply 3 on: Yesterday
Great answer, keep it coming :)

 

Did you know?

More than 150,000 Americans killed by cardiovascular disease are younger than the age of 65 years.

Did you know?

The first successful kidney transplant was performed in 1954 and occurred in Boston. A kidney from an identical twin was transplanted into his dying brother's body and was not rejected because it did not appear foreign to his body.

Did you know?

About 3.2 billion people, nearly half the world population, are at risk for malaria. In 2015, there are about 214 million malaria cases and an estimated 438,000 malaria deaths.

Did you know?

Urine turns bright yellow if larger than normal amounts of certain substances are consumed; one of these substances is asparagus.

Did you know?

Nearly 31 million adults in America have a total cholesterol level that is more than 240 mg per dL.

For a complete list of videos, visit our video library