When the Rate of Appreciation of the Nominal Exchange Rate

question 69

Multiple Choice

When the rate of appreciation of the nominal exchange rate equals the foreign inflation rate minus the domestic inflation rate,we say there is

• A)relative purchasing power parity.
• B)purchasing power parity.
• C)a Phillips curve.
• D)an aggregate supply shock.

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Definitions:

Nonlabor Income

Income received that is not earned from direct labor or employment, such as dividends, interest, or rental income.

Wage Rate

The amount of money paid to employees for their work or services, often expressed per hour or year.

Labor

The human labor, involving both physical and intellectual activities, utilized in the creation of products and services.

Leisure

Free time when one is not working or occupied; time available for ease, relaxation, and activities one enjoys.