1. According to the Fisher effect, if Swedish inflation were to fall permanently from a constant rate of 5% per year to a constant rate of 2% per year, then in the long-run:
a. Swedish interest rates would be higher by a 2/5 percentage point per year compared to their initial level, all else equal.
b. Swedish interest rates would be higher by 5/2 percentage points per year compared to their initial level, all else equal.
c. Swedish interest rates would be lower by a 2/5 percentage point per year compared to their initial level, all else equal.
d. Swedish interest rates would be higher by 3 percentage points per year compared to their initial level, all else equal.
e. Swedish interest rates would be lower by 3 percentage points per year compared to their initial level, all else equal.
2. The link between prices of similar goods sold in different countries, as suggested by purchasing power parity,
a. is strengthened when monopolistic or oligopolistic practices in goods markets interact with trade barriers.
b. is weakened when monopolistic or oligopolistic practices in goods markets interact with trade barriers.
c. is strengthened when there are monopolistic or oligopolistic practices in goods markets, regardless of whether there are trade barriers.
d. is unrelated to the existence of monopolistic or oligopolistic practices in goods markets; that link is only affected by the existence of trade barriers.
e. is weakened when there are monopolistic or oligopolistic practices in goods markets, regardless of whether there are trade barriers.
3. Bela Balassa's theory would explain that it is more costly to get a haircut in Norway than in Mexico because:
a. Norwegians have a more inelastic demand for haircuts than Mexicans.
b. Norwegian have a more elastic demand for haircuts than Mexicans.
c. Norwegian barber wages are driven up by the higher wages (compared to Mexico) offered in the oil sector, which has higher labor productivity than the oil sector in Mexico.
d. Mexican barbers are being exploited.
e. as barbers, Norwegian barbers are more productive than Mexican barbers.
1. According to the Fisher effect, if Swedish inflation were to fall permanently from a constant rate of 5% per year to a constant rate of 2% per year, then in the long-run:
a. Swedish interest rates would be higher by a 2/5 percentage point per year compared to their initial level, all else equal.
b. Swedish interest rates would be higher by 5/2 percentage points per year compared to their initial level, all else equal.
c. Swedish interest rates would be lower by a 2/5 percentage point per year compared to their initial level, all else equal.
d. Swedish interest rates would be higher by 3 percentage points per year compared to their initial level, all else equal.
e. Swedish interest rates would be lower by 3 percentage points per year compared to their initial level, all else equal.
2. The link between prices of similar goods sold in different countries, as suggested by purchasing power parity,
a. is strengthened when monopolistic or oligopolistic practices in goods markets interact with trade barriers.
b. is weakened when monopolistic or oligopolistic practices in goods markets interact with trade barriers.
c. is strengthened when there are monopolistic or oligopolistic practices in goods markets, regardless of whether there are trade barriers.
d. is unrelated to the existence of monopolistic or oligopolistic practices in goods markets; that link is only affected by the existence of trade barriers.
e. is weakened when there are monopolistic or oligopolistic practices in goods markets, regardless of whether there are trade barriers.
3. Bela Balassa's theory would explain that it is more costly to get a haircut in Norway than in Mexico because:
a. Norwegians have a more inelastic demand for haircuts than Mexicans.
b. Norwegian have a more elastic demand for haircuts than Mexicans.
c. Norwegian barber wages are driven up by the higher wages (compared to Mexico) offered in the oil sector, which has higher labor productivity than the oil sector in Mexico.
d. Mexican barbers are being exploited.
e. as barbers, Norwegian barbers are more productive than Mexican barbers.
