The Figure Given Below Depicts the Foreign Exchange Market for British

question 44

Multiple Choice

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2

-Purchasing power parity exists when domestic currency:

• A)maintains a fixed exchange rate with foreign currency.
• B)is not convertible into foreign currency.
• C)buys more goods at home than abroad.
• D)buys as many goods at home as it does abroad.
• E)appreciates in value against foreign currency.

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Definitions:

Capital

Resources made and used to produce goods and services, including tools, equipment, machinery, and buildings.

Labor

The application of both mental and physical human capacities for the generation of goods and services.

Marginal Physical Product

The additional quantity of output that is produced by using one more unit of a given input, assuming all other inputs remain constant.

Total Revenue Product

The total revenue generated by a firm from selling the output produced by an additional unit of a factor of production.