Given the U

question 213

Multiple Choice

Given the U.S.price level P,the foreign country price level P*,and the nominal exchange rate E in foreign currency per U.S.dollar,the real exchange rate RER is given by

• A) RER = E × (P/P*)
• B) RER = E × (P*/P)
• C) RER = (P/P*) / E
• D) RER = P / (E/P*)

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Definitions:

Price Floor

A minimum price set by the government or a governing body below which a product cannot be sold legally.

Producer Surplus

The difference between the amount producers are willing to sell a good for and the amount they actually receive.

Price Ceiling

A government-imposed limit on how high a price is charged for a product, service, or commodity, intended to protect consumers from high prices.

Persistent Shortage

A situation where the demand for a good or service consistently exceeds its supply, over a significant period of time.