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Author Question: Suppose a year ago the exchange rate between Mexican pesos and dollars was 13.5 pesos per dollar, ... (Read 115 times)

tth

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on: Jun 30, 2018
Suppose a year ago the exchange rate between Mexican pesos and dollars was 13.5 pesos per dollar, and that according to relative PPP the exchange rate was in equilibrium.
 
  Furthermore, assume that since then, Mexican inflation has been 12 percent while the U.S. inflation has been 3 percent. If according to relative PPP the peso is now said to be overvalued, what is a possible exchange rate consistent with this assertion? A) 13.5 pesos per dollar.
  B) 14.72 pesos per dollar.
  C) 15 pesos per dollar.
  D) 20 pesos per dollar.

Question 2

If Slovenia is a small country in world trade terms, then if it imposes a large series of tariffs on many of its imports, this would
 
  A) have no effect on its terms of trade.
  B) improve its terms of trade.
  C) deteriorate its terms of trade.
  D) decrease its marginal propensity to consume.
  E) increase its exports.


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ilianabrrr

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Reply #1 on: Jun 30, 2018
Answer to Question 1

A

Answer to Question 2

A


tth

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Reply #2 on: Jun 30, 2018
Thank you :)


ilianabrrr

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Reply #3 on: Jun 30, 2018
Happy to help you


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