Suppose a country is perceived to have an overvalued real exchange rate does not devalue. Which of the following would we expect to occur over time?
A) a reduction in its price level
B) a real depreciation of its currency
C) a reduction in its trade surplus
D) all of the above
E) none of the above
Question 2
Suppose two countries are identical in every way with the following exception. Economy A has a greater quantity of human capital than economy B. Given this information, we know with certainty that
A) steady state consumption in A is higher than in B.
B) steady state consumption in A is lower than in B.
C) steady state consumption in A and in B are equal.
D) steady state growth of output per worker is higher in A than in B.
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