Which of the Following Is Likely to Happen If Investors

question 174

Multiple Choice

Which of the following is likely to happen if investors in an economy become optimistic following the discovery of huge mineral reserves?

• A) Real wages will fall.
• B) Prices will fall.
• C) Consumption will increase.
• D) Unemployment will increase.

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Definitions:

Absolute Purchasing Power Parity

A theory that states that exchange rates between currencies are in equilibrium when their purchasing power is the same in each of the two countries.

Trading Barriers

Restrictions or laws that limit the ability to trade goods, services, or financial instruments across borders or within markets.

Absolute Purchasing Power Parity

A theory that asserts that in the absence of market frictions, identical goods in different countries should have identical prices when expressed in a common currency.

Transactions Costs

The expenses associated with buying or selling goods and services, including fees, taxes, and other charges.