13. If purchasing-power parity holds, a dollar will buy (a) one unit of each for

Question

13. If purchasing-power parity holds, a dollar will buy (a) one unit of each foreign currency b) foreign currency equal to the U.S. price level divided by the foreign countrys price evel. (c) enough foreign currency to buy as many goods as it does in the United States d) None of the above is implied by purchasing-power parity. 14. An MP3 player in Singapore costs 200 Singaporean dollars. In the U.S. it costs 100 US dollars. What is the nominal exchange rate if purchasing-power parity holds? (a) 2.0 (c) .50 (d) None of the above is correct

Explanation / Answer

Ans 13

Option B is the correct response as if PPP holds then exchange rate between two currencies is equal to ratio of purchasing pwer of two countries

Ans 14

USD/SGD=2.0 ( IN this question we have not given what exchange rate we need USD/SGD or SGD/USD then if USD/SGD=2 or SGD/USD=0.5 choose accordingly)

Ans 15

Exchange rate is 0.4 before the hike and now 0.5 after hence Nominal exchange rate depreciate

Option A is correct response

Ans 16

Increase in Interest rate increases opportunity cost hence increases the savings and demand decreases for investment goods that is it moves along the demand for loanable funds curve

OPtion A is correct

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