Author Question: If the purchasing power of the dollar is greater than the purchasing power of the euro, purchasing ... (Read 209 times)

asmith134 · **on:** Jun 29, 2018

If the purchasing power of the dollar is greater than the purchasing power of the euro, purchasing power parity predicts that the exchange rate will

A) not fluctuate and stay constant in the long run.
B) increase if the exchange rate is greater than 1 euro per dollar.
C) decrease if the exchange rate is less than 1 euro per dollar.
D) be equal to the relative purchasing power across the currencies in the long run.

Question 2

Refer to Table 16-4. Consider the hypothetical information in the table above for potential real GDP, real GDP, and the price level in 2016 and in 2017 if Congress and the president do not use fiscal policy.

If Congress and the president use fiscal policy successfully to keep real GDP at its potential level in 2017, which of the following will be lower than if Congress and the president had taken no action?
A) real GDP and potential GDP B) potential GDP and the inflation rate
C) real GDP and the inflation rate D) real GDP and the unemployment rate