Which of the following events will cause the smallest change in the real exchange rate ()?
A) a 6 drop in E and a 6 increase in the foreign price level (P)
B) a 6 increase in the domestic price level (P) and a 6 reduction in P
C) a 6 drop in E and a 6 reduction in P
D) a 3 increase in E
E) a 2 increase in E and a 2 increase in P
Question 2
Based on our understanding of the labor market model presented in Chapter 6, we know that an increase in the markup will cause
A) an increase in the equilibrium real wage.
B) a reduction in the equilibrium real wage.
C) a reduction in the natural rate of unemployment.
D) both B and C
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