Question Details

The purchasing power parity hypothesis implies that an increase in inflation 


Question 1

European Union labor costs exceed U.S. and British labor costs primarily because
Answer
a.	worker productivity is lower in the EU
b.	union wages are higher in the EU
c.	layoffs and plant closings are more restrictive in the U.S. and Britain
d.	the amount of paid time off is higher in the EU
e.	labor-management relations are better in the EU
Question 2

The purchasing power parity hypothesis implies that an increase in inflation in one country relative to another will over a long period of time
Answer
a.	increase exports
b.	reduce the competitive pressure on prices
c.	lower the value of the currency in the country with the higher inflation rate
d.	increase foreign aid
e.	increase the speculative demand for the currency

Question 3

An appreciation of the U.S. dollar has what impact on Harley-Davidson (HD), a U.S. manufacturer of motorcycles?
Answer
a.	domestic sales of HD motorcycles increase and foreign sales of HD motorcycles increase
b.	domestic sales of HD motorcycles decrease and foreign sales of HD motorcycles increase
c.	domestic sales of HD motorcycles increase and foreign sales of HD motorcycles decrease
d.	domestic sales of HD motorcycles decrease and foreign sales of HD motorcyclesdecrease
Question 4

Companies that reduce their margins on export products in the face of appreciation of their home currency may be motivated by a desire to
Answer
a.	sacrifice market share abroad but build market share at home
b.	increase production volume to realize learning curve advantages
c.	sell foreign plants and equipment to lower their debt
d.	reduce the costs of transportation
Question 5

The combinations of inputs costing a constant C dollars is called:
Answer
a.	anisocost line
b.	an isoquant curve
c.	the MRTS
d.	anisorevenue line



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