Nontradables Are Cited as a Reason Why Purchasing Power Parity

question 98

Multiple Choice

Nontradables are cited as a reason why purchasing power parity doesn't hold because:

• A) goods that you can't transport cannot be sold for a profit elsewhere, even if the price differs in different locations.
• B) there is no economic opportunity to profit if the goods cannot be sold in another market for another price.
• C) location-specific goods are impossible to calculate a price elsewhere for.
• D) All of these statements are true.

Understand the mechanisms through which the Federal Reserve controls the money supply.

Recognize the historical context and purposes behind the establishment of the Federal Reserve System.

Understand the different tools of monetary policy, including open market operations, the discount rate, and reserve requirements.

Identify the effects of monetary policy decisions on financial institutions and markets.

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Definitions:

Average-Variable-Cost

The total variable cost divided by the quantity of output produced.

Marginal Costs

The investment required to manufacture an incremental unit of a product or service.

Variable Costs

Costs that change in proportion to the level of activity or production volume.

Fixed Costs

Costs that do not change with the level of output produced by the firm, such as rent, salaries, or loan repayments.