Assuming a fixed exchange rate, a decrease in U.S. prices relative to European prices will:
a. decrease European exports to the United States.
b. increase U.S. imports from Europe.
c. decrease aggregate spending in the U.S.
d. not affect U.S. exports or imports.
e. raise the purchasing power of U.S. consumers.
Question 2
A good economic theory:
a. includes every detail that affects the economic behavior of interest.
b. relies on simplifying assumptions in order to explain economic behavior.
c. does not rely on simplifying assumptions.
d. is impossible to achieve because of the difficulty of conducting controlled experiments.
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