If Purchasing-Power Parity Holds,when a Country's Central Bank Increases the Money

question 6

Multiple Choice

If purchasing-power parity holds,when a country's central bank increases the money supply,a unit of money

• A)gains value both in terms of the domestic goods and services it can buy and in terms of the foreign currency it can buy.
• B)gains value in terms of the domestic goods and services it can buy,but loses value in terms of the foreign currency it can buy.
• C)loses value in terms of the domestic goods and services it can buy,but gains value in terms of the foreign currency it can buy.
• D)loses value both in terms of the domestic goods and services it can buy and in terms of the foreign currency it can buy.

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Definitions:

Average Total Cost

This refers to the total cost per unit of output, calculated by dividing the total cost of production by the number of units produced.

Marginal Cost

The rise in expense incurred from manufacturing an extra unit of a product or service.

Shutdown Point

The level of operations at which a company does not benefit from continuing operations or producing any output due to high variable costs.

Output

The total amount of goods or services produced by an economic system or entity within a given period.