When in 1985 a British Pound Cost Approximately $1

question 63

Multiple Choice

When in 1985 a British pound cost approximately $1.30,a Shetland sweater that cost 100 British pounds would have cost $130. With a weaker dollar,the same Shetland sweater would have cost

• A)less than $130.
• B)more than $130.
• C)$130,since the exchange rate does not affect the prices that American consumers pay for foreign goods.
• D)$130,since the demand for Shetland sweaters will decrease to prevent an increase in price due to the stronger dollar.

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Definitions:

Utility Function

A mathematical representation of how different combinations of goods or services produce levels of happiness or satisfaction for an individual or entity.

Pareto Optimal

A state of allocation of resources in which it is impossible to make any individual better off without making at least one individual worse off, indicating an efficient distribution of goods and resources.

Endowment

The total resources available to an individual or institution, including assets, capabilities, and financial means.

General Equilibrium Analysis

A method in economics that attempts to understand how supply and demand interact across multiple markets simultaneously, and how they reach a state of balance.