What market forces prevent absolute ppp from holding

Assignment Help Macroeconomics

Reference no: EM13897818

1. What market forces prevent absolute PPP from holding in real economies? Which of these represent unexploited profit opportunities?

2. Why is it better to use a PPP exchange rate to compare incomes across countries than an actual exchange rate?

3. What is relative PPP, and why does it represent a weaker relationship between exchange rates and prices than absolute PPP?

4. What is the real exchange rate, and how are fluctuations in the real exchange rate related to deviations from absolute PPP?

5. If the nominal exchange rate between the Mexican peso and the U.S. dollar is fixed, and there is higher inflation in Mexico than in the United States, which currency experiences a real appreciation and which experiences a real depreciation? Why? What is likely to happen to the balance of trade between the two countries?

Reference no: EM13897818

Questions Cloud

Expected changes in supply and demand : Expected changes in supply and demand

Compose a brief summary of the author main points : Prepare a paper that meets or exceeds the following requirements: Compose a brief summary of the author's main points. Assess the value and challenges of clinical decision support systems (CDSSs), in general, and of computerized physician order en..

What were views of wicksell on exogeneity of money supply : What were the views of Keynes and Friedman on the exogeneity or endogeneity of the money supply? What justi?es their views? What were the views of Wicksell on the exogeneity or endogeneity of the money supply? What justi?es his views?

The federal government enacts new tariffs and quotas on all : The federal government enacts new tariffs and quotas on all imports

What market forces prevent absolute ppp from holding : What market forces prevent absolute PPP from holding in real economies? Which of these represent unexploited profit opportunities?

How many phases do the ones you found on the web contain : Prepare a document (minimum of one page) answering the following questions: Do all these life cycles follow the same general path? How many phases do the ones you found on the Web contain

Discuss friedman views on velocity and his velocit function : Discuss the following statement: Friedman's critique of Keynesian liquidity preference theory, and especially of the Keynesian speculative motive, is more concerned with the stability rather than with the interest elasticity of money demand.

Do you think such volatility exists in the modern economy : For Keynes, the speculative component of money demand was volatile. This made the demand for money and the money multiplier volatile, so that monetary policy became an unreliable tool for stabilization. What were Keynes's reasons for his assertion..

Identify the cultural differences in bribery practices : Identify the cultural differences in bribery practices

User Account

All Pages