If the Implied Exchange Rate Between Big Mac Prices in the United

question 243

Multiple Choice

If the implied exchange rate between Big Mac prices in the United States and Poland is 2.13 zlotys per dollar,but the actual exchange rate between the United States and Poland is 3.16 zlotys per dollar,which of the following would you expect to see?

• A)an appreciation of the dollar
• B)an increase in the demand for zlotys
• C)an increase in the demand for dollars
• D)Both A and C are correct.

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Definitions:

Cost Function

A mathematical relationship that describes how production costs change with variations in output level.

Reaction Curves

Graphs showing how one firm’s optimal output decision responds to quantities of output by competing firms in a market.

Simultaneous Equations

A set of equations containing multiple variables that are all solved together.

Cross-License

An agreement between two or more parties to grant mutual rights to their respective intellectual property.