Exam 14: Exchange Rates I: the Monetary Approach in the Long Run

Construct an example that demonstrates the law of one price. Use specific numbers.

If an automobile costs $32,000 in New York and $1 = 0.8 euros, then under the condition of the law of one price, the cost of the automobile in Rome should be:

In the international goods market, prices of goods in different countries expressed in a common currency must be equalized. This concept is called:

In which decade did the use of nominal anchors and explicit targets begin to be common in many nations?

If a pound of coffee beans costs 85 pesos in Mexico City and 10 pesos = 35 rupees, then the same pound of coffee should cost _________ rupees in New Delhi, under the condition of the law of one price.

(Table: Exchange Rates and Prices) Suppose a computer costs $500 in the United States. With the price of the computer given in the local currency, the Brazilian real is _______.

The data on exchange rate and price-level fluctuations in the United States and the United Kingdom from 1975 to 2010 suggest that:

Of the following targets or nominal anchors, which is NOT useful for controlling domestic inflation?

The MOST restrictive measurement of money is:

The half-life of PPP deviations is about:

While the law of one price relates prices on individual goods to the exchange rate, the theory of PPP relates:

The idea that with frictionless trade all goods traded internationally will have the same equilibrium price no matter which currency they are priced in is known as:

The criterion for including an asset in any measure of money is whether it is:

The half-life of a PPP divergence indicates how long it takes:

It is not surprising to learn that, during hyperinflations, the demand for real money balances:

Which of the following statements about the relationship between money, prices, and exchange rates in the long run is NOT correct?

In equilibrium, with purchasing power parity, the nominal exchange rate will be equal to:

Price stickiness refers to:

For real interest parity to hold, we require:

What is the Big Mac Index?