Question

1. The "law of one price" applies to all goods, except those that:

A. Are produced only in one location.

B. Cannot be transported.

C. Are produced in a country that does not have a comparative advantage.

D. Are affected by arbitrage.

E. Are included in calculating the parity of purchasing power.

2. Which of the following would cause the U.S. demand curve for the Japanese yen to shift to the right?

A. An increase in the U.S. inflation rate compared to the rate in Japan

B. A higher real rate of interest on investments in Japan than on investments in the United States

C. The popularity of products produced in Japan increases in the United States

D. All of the above

E. None of the above

3. Which of the following might cause the U.S. dollar to depreciate against the Japanese yen?

A. Greater popularity of U.S. exports in Japan

B. An increase in the price level in Japan

C. Higher real interest rates in the United States

D. Higher incomes in the United States

E. Diminished demand for Japanese products in the United States

4. If the value of the U.S. dollar in foreign exchange markets rises:

A. U.S. exports will become relatively less expensive.

B. capital inflows into the United States will increase.

C. people in the U.S. will purchase fewer imports.

D. U.S. exports will likely decrease.

E. All of the above