Shoeleather costs refer to
A. the cost of more frequent price changes induced by higher inflation.
B. resources used to maintain lower money holdings when inflation is high.
C. the distortion in resource allocation created by distortions in relative prices due to inflation.
D. the distortion in incentives, created by inflation, by taxes that do not adjust for inflation.
Menu costs refer to
A. the distortion in incentives created by inflation when taxes do not adjust for inflation.
B. the cost of more frequent price changes induced by higher inflation.
C. resources used by people to maintain lower money holdings when inflation is high.
D. the distortion in resource allocation created by distortions in relative prices due to inflation.
A Chinese firm opens a watch factory in the United States.
A. This is Chinese foreign direct investment and by itself increases Chinese net foreign investment.
B. This is Chinese foreign direct investment and by itself decreases Chinese net foreign investment.
C. This is Chinese foreign portfolio investment and by itself increases Chinese net foreign investment.
D. This is Chinese foreign portfolio investment and by itself decreases Chinese net foreign investment.
In which of the following situations must national saving rise?
A. domestic investment increases and net foreign investment decreases.
B. domestic investment decreases and net foreign investment increases.
C. both domestic investment and net foreign investment increase.
D. net exports decrease and domestic investment is unchanged.
Which of the following does purchasing-power parity imply?
A. the purchasing power of the dollar is the same in the United States as in foreign countries.
B. the price of domestic goods relative to foreign goods cannot change.
C. the nominal exchange rate is the ratio of U.prices to foreign prices.
D. All of the above are correct.
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