If There Was No Profit Effect,but There Was a Misperception

question 15

Multiple Choice

If there was no profit effect,but there was a misperception effect in the short run,how would the SRAS and LRAS curve be drawn?

• A)The SRAS and LRAS would both be vertical.
• B)The SRAS would be vertical and the LRAS would be upward sloping.
• C)The SRAS would be upward sloping and the LRAS would be vertical.
• D)The SRAS and LRAS would both be upward sloping.

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Definitions:

Dollar-Peso Exchange Rate

The rate at which the currency of one country (dollar) can be exchanged for the currency of another country (peso), influencing international trade and investment.

Mexican Government

The federal constitutional republic of Mexico, which is governed by a president and a bicameral legislature.

Fixed Exchange-Rate System

An exchange rate regime where a country's currency value is pegged to another currency, a basket of currencies, or a commodity like gold.

Local Currency

The currency that is legally accepted within a country and typically used for all financial transactions within that geographical boundary.