If the Law of One Price Holds, and a Tonne

question 4

Multiple Choice

If the law of one price holds, and a tonne of rice costs $25 in Australia and 4000 yen in Japan, then the nominal exchange rate is:

• A)160 yen/$ and $.10/ yen
• B)1000 yen/$ and $1.00/ yen
• C)400 yen/$ and $.25/ yen
• D)160 yen/$ and $.01/ yen

---

Definitions:

Consumption Expenditures

The total amount of money spent by households and individuals on goods and services for personal use.

Circular Flow Diagram

A visual model of the economy that shows how dollars flow through markets among households and firms.

Households

Economic units that consist of all individuals who live together in one dwelling, making joint decisions about consumption and labor.

Circular Flow Model

An economic model illustrating the continuous movement of money, goods and services, and factors of production between producers and consumers in an economy.