Attempt Aggregate Demand and Aggregate Supply - End of Chapter Problem Use the accompanying diagrams to illustrate the process by which each of the following government policies will move the economy from one long-run macroeconomic equilibrium to another In each case move the appropriate curve(s) and then mark the short-run equilibrium by Esr and the long-run equilibrium by EUR a. There is an increase in taxes on households. LRAS SRAS Afgrcgale price level LR SR Question 12 of 15 a. There is an increase in taxes on households. TRAS SRAS Aggregate price level KER 3 SR AD Real GDP b. There is an increase in the quantity of money. ERAS SRAS LR Aggregate price level SR AD Real GDP Incorrect c. There is an increase in government spending. TRAS SRAS LR Aggregate price level E SR AD Real GDP

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Answer 1

The initial equilibrium of the economy is shown in the graphs. Imagine if the government reduces taxes.

The price level and GDP both rise in the short run. Prices rise over time but GDP stays steady. Tell us about the government. The framework that a state or country is in charge of is referred to as "government." As we can see, there are many governments in various countries; these governments were established by and serve the interests of their inhabitants. A framework that will control how the government is run is being developed. When the government lowers taxes, consumers have more money to spend. The AD curve moves to the right as a result. The graphs depict the economy's initial equilibrium. Imagine that taxes were raised by the government. The price level and GDP both rise in the short run.

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Related Questions

Suppose you normally work in the stock room and are not a trained retail associate. You are stocking new merchandise. A customer start

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about it because no other retail employees can be seen. You are aware that one of the regular retail associates in that area is absent on leave due to illness, and the other is taking a lunch break outside the store.

Who are Retail Employees?

A retail salesperson works in a store and sells books, automobiles, clothing, cosmetics, electronics, furniture, lumber, plants, shoes, and a wide range of other goods. They are also known as salespeople, retail clerks, or salespeople. In the United States, over 4.6 million retail salespeople are employed.

The majority of retail salespeople work in neat, well-lit stores. A lot of salespeople work nights and weekends.

What retail employees want—insights for increasing engagement and retention—reveals what makes retail workers tick. We discover that retail workers are among the most self-assured and are more likely than workers in other occupations to believe that their product or service is superior to that of their rivals. However, they are also the least likely of all industries to believe that their pay is competitive and are prepared to leave for a better offer. There are retail salespeople who work part-time.

Types of workers:

Permanent employees.Workers who work part-timeSeasonal WorkersTemporary Workers

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What is an important influence in desired service expectations?

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The type of service that customers hope to receive is termed as desired service.

What is service expectations?

Our findings imply that there are two levels of customer service expectations: desired and adequate. The level of service the client aspires to obtain is the desired service level.

It combines the customer's ideas of what "can be" and "should be." The level of service that the consumer thinks acceptable is considered adequate. Support Groups can outline the services they offer, how they deliver them, what determines the cost of those services, how they gauge success, and how they benefit the service user and university in Service Expectation Statements (SESs).

Service Expectation Reviews allow customers the chance to offer feedback on the services rendered, cooperatively negotiate service adjustments, and have services removed where they are no longer necessary. 

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What is the best definition of economic data brainly?

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Economic data and statistics are information that explains the history and present state of the economy. Usually discovered in the form of a time-series that includes multiple time periods. Surveys of persons, businesses, and industries in a single economy or for the global economy can be used to collect data.

The social science of economics deals with the creation, exchange, and consumption of products and services. Economics is the study of how economies work as well as the behavior and interactions of economic actors. The study of microeconomics focuses on what are thought to be the fundamental components of the economy, such as the interactions that result from market and agent activity. Individual agents can represent a variety of clients, including homes, companies, buyers, and sellers. The study of the economy as a coexisting system of production, consumption, saving, and investment is known as macroeconomics. Additionally, it looks at the elements that have an impact on this system, including the use of labor, capital, and natural resources, currency inflation, economic expansion.

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ECONOMIC DATA

Economic data is numerical information that provides insight into the performance and direction of various economic indicators such as inflation, employment, GDP and other statistics. Economic data is often graphed or visualized in order to make it easier to interpret, and can be used to inform business decisions and inform government policy.

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The entry to transfer a net loss to the owner's capital account would include a debit to
A) the owner's capital account and a credit to Cash.
B) the owner's drawing account and a credit to the owner's capital account.
C) Income Summary and a credit to the owner's capital account.
D) the owner's capital account and a credit to Income Summary.

Answers

A debit to (D) the owner's capital account and a credit to Income Summary make up the entry to transfer a net loss to the owner's capital account.

The Owners Capital Account is what?

The equity account that appears on a company's balance sheet is called an owners capital account. It indicates the total ownership stakes that investors hold in a company. This account holds the owners' investment in the company as well as the net income it generates, which is then decreased by any draws made to the owners.

Only through the end of the prior fiscal year will the data in the owners capital account be fully current. The following transactions will be added to temporary accounts for the current year.

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What you give up in the future to make a purchase today?

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When you make a purchase today, you give up the ability to use that money for something else in the future as investment. This is known as the opportunity cost of a decision.

What's better, purchase or investment?

The decision between making a purchase or investing the money depends on the individual's goals and priorities for investment A purchase may provide immediate satisfaction and the  opportunity cost to use the item or service right away. A purchase may not provide long-term financial benefits. Investment money can provide potential long-term financial gains, but it also involves some level of risk. investment money may not provide immediate satisfaction. It is important to consider both short-term and long-term goals when making a decision about whether to make a purchase or  opportunity cost of the money. It's important to weigh the potential benefits and drawbacks of each option. It's recommended to consult with a financial advisor before making any investment decisions.

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If the CPI was 108.00 in 1942 and is 336.96 today, then $10 in 1942 purchased the same amount of goods and services as a. $2.57 purchases today. b. $31.20 purchases today. c. $38.89 purchases today. d. $28.89 purchases today.

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If the CPI was 108.00 in 1942 and is 336.96 today, then $10 in 1942 purchased the same amount of goods and services as  $31.20 purchases today.

A consumer price index is a price index that measures the cost of a weighted average market basket of consumer products and services purchased by households. Variations in the measured CPI reflect changes in pricing over time. A CPI is a statistical estimate based on the prices of a sample of typical products whose prices are gathered on a regular basis.

Sub-indices and sub-sub-indices for various categories and sub-categories of products and services can be computed and aggregated to generate the overall index, with weights indicating their portions of the total consumer expenditures covered by the index. It is one of numerous price indexes calculated by most national statistics organizations.

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If $1,120 is invested at an interest rate of 15% per year and is compounded continuously, how much will the investment be worth in 7 years

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The worth of investment in 7 years will be $3,200.57.

we know that,

The equation to use to determine continuously compounded interest is

[tex]A= P(e)^{rt}[/tex]

 

where,

The final investment value is A.

P is the initial investment's principal.

The interest rate in decimal form is r.

There are t time periods.

The mathematical constant is called e.

we have,

[tex]t= 7 \:years\\r= 0.15\\P= $1,120\\[/tex]

 

Substitute in the formula above  

[tex]A= $1,120(e)^{0.15*7}[/tex]

[tex]A= $3,200.57[/tex]

Therefore, The worth of investment in 7 years will be $3,200.57.

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When dealing with scarcity, it is important to identify the best way to use the item that
is

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Answer:

Explanation:

in short supply

The following data has been gathered concerning a particular investment and conditions in the market. Risk free rate 4.5% Market return 11% Beta of investment 1.35 According to the Capital Asset Pricing Model, the required return for this investment is
(a) 8.8%.
(b) 12.9%.
(c) 13.3%.
(d) 14.9%

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The risk-free rate is the interest a potential investor may get over a certain time period from a completely risk-free investment.

Which three methods of investing?

There are three main options: fixed income, equities, and real estate (bonds). Each has unique hazards, chances, and tax laws. The earnings, interest, and rentals from a well-rounded portfolio may seem complicated, but they may be well worth the effort.

How do investments function?

You deposit funds into an institution or fund with the intention of generating a profit in order to invest. Over time, investing may yield higher returns (which may also include more risk). For this reason, some people utilize investing to achieve long-term objectives like retirement.

Where

The Equity value is K.

The risk-free return rate is RF.

Bi is the currency's beta.

The Relationship Between the return from the Marketplace, or ERm,

Ke= 4.5% + 1.35(11% -4.5%) = 13.275%(C)

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According to the Capital Asset Pricing Model, the required return for this investment is 13.3%. (Option C)

How do investments function?

You deposit funds into an institution or fund with the intention of generating a profit in order to invest. Over time, investing may yield higher returns (which may also include more risk). For this reason, some people utilize investing to achieve long-term objectives like retirement.

Where

The Equity value is K.

The risk-free return rate is RF.

Bi is the currency's beta.

The Relationship Between the return from the Marketplace, or ERm,

Ke= 4.5% + 1.35(11% -4.5%) = 13.275%(C)

Which three methods of investing?

There are three main options: fixed income, equities, and real estate (bonds). Each has unique hazards, chances, and tax laws. The earnings, interest, and rentals from a well-rounded portfolio may seem complicated, but they may be well worth the effort.

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I. Choose a picture of a family member, a friend, or a person that you admire in business, political, sports entertainment and other industries that motivate you to achieve your dream. Be creative with your answer.

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Explanation:

Ronaldo is a person I admire

Which one of the following is not a typical characteristic of a weak company culture?
a. No strong employee allegiance to what the company stands for or to operating the business in well-defined ways
b. Few, if any, entrenched operating practices and culture-induced norms to align, constrain, or otherwise paint the white lines for the actions, decisions, and behavior of company personnel
c. Individuals encounter little pressure to do things in particular ways
d. A complicated value chain and a very diverse set of core competencies--both of which act to create multiple subcultures
e. Little employee passion about the company and emotional commitment to what it is trying to accomplish--conditions that often result in many employees viewing their company as just a place to work and their job as just a way to make a living

Answers

Option D is correct. A complex value chain and a wide range of core competencies, both of which contribute to the formation of multiple subcultures, are not typical characteristics of a weak company culture.

What Is a Weak Company Culture?

A weak culture is one in which all employees do not share the company's values and the values are not very strong. IPolicies that are flawed, poor decision-making, a lack of communication, and other factors contribute to a weak culture. Employees are not particularly pleased with the company's rigid procedures and bureaucracy in such a culture.

One factor that influences the organizational structure is culture. The culture of the organization affects a lot of things, like how decisions and policies are made and how satisfied and engaged employees are. There are two kinds of organizational cultures: strong and weak. Individualism is a strong characteristic of weak culture. Organizations that fail to place a greater emphasis on the idea of teams and groups actually have a culture that is lacking in strength. In order to value and respect each individual's contribution, they have attractive incentive and reward systems. A closed culture develops within the organization. Although individual innovation and creativity are high, there is less interaction among employees, and individuals limit their creativity to themselves in order to take advantage of incentives, there is less influence on the organization.

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Think of a favorite product that you have. What do you think ALL of the things are that have to happen before you see the product in the store?

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The transformation of raw materials into finished goods. Natural items are transformed into goods that can be sold on the market through manufacturing.

What are the initial steps ?

The acquisition and monitoring of raw materials is the initial step in inventory management. The environment can be mined for raw materials or they can be purchased from sources. Once received, raw materials must be kept in storage until they are needed for manufacturing. Systems of inventory keep track of the quantity, location, and state of each raw item.

Work in process refers to the production process from storage to the assembly line. Production might be carried out internally or contracted out to manufacturers. Inventory management systems monitor the production process and the finished goods as they are produced in both scenarios.

The number, location, and state of each end product must be monitored. The system is updated in response to product purchases to account for the drop in inventory following distribution.

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True or false: You should include either budget information or a time estimate in your content creation plan.

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The given statement is true about the budget information or a time estimate in the content creation plan.

A budget is a calculating play, typically financial but not necessarily, for a specific time frame, typically one year or a month. A budget accounts for anticipated income and costs as well as future saving and spending. Individuals and businesses may both use budgeting to determine whether or not their predicted revenue and costs will allow them to continue operating. A budget that includes information on the projected value of sales and cost may be created for each fiscal year. This allows you to predict how the upcoming accounting period will probably conclude. The business's actual performance may be compared to the suggested strategy. Budgets are a quantitative way for businesses, governments, families, and other groups to articulate their strategic plans of action.

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Alesandro, a manager at Harwood Publishing, gave a bad reference to a former employee. Alesandro could most likely be accused of ________ if the information is both false and harmful.

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The concept mentioned is Defamation. It is an unauthorized false statement of fact communicated to a third party that damages the person's reputation.

Defamation is giving false information about a person, place or thing to a third party, thereby damaging their reputation. It can be spoken or written.

It's a felony . Defamation is when something false and harmful is presented as fact to another person.

If the person defamed is a private person and not a celebrity or public figure, defamation can be proven even if the statement was made negligently to establish the truth. This means it is easier to prove defamation if you are an individual.

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An increase in the rate of inflation would be most likely to result from a(n):
A) decrease in spending by the federal government. C) rise in interest rates.
B) rise in the unemployment rate. D) increase in the supply of money in circulation
A large decrease in the money supply would tend to:
A) reduce the supply of gold held by the federal government.
B) create shortages that would cause prices of goods and services to rise.
C) throw the economy into a recession.
D) reduce the size of the federal government's deficit.

Answers

The expansion of the available supply of currency is Option (D).

How does supply of money work?

The total amount of money held by the general public at any particular time is referred to as the "money stock" or "money supply" in macroeconomics. Although there are many different ways to define "money," typical metrics frequently include money in circulation and demand deposits (depositors' easily available assets documented on financial institutions' books). A country's central bank is permitted to define what counts as legal tender on its own terms.

Data on the nation's money supply are normally gathered and released by a government agency or the central bank. Both public and private sector specialists monitor changes in the money supply because they think that fluctuations in the money supply have an effect on inflation, economic cycles, currency rates, and security prices.

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Which term best describes monies spent to minimize the impact that threats and unfavorable conditions have on a business

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Money spent to reduce the impact that threats and unfavorable circumstances have on a business is best described by the term "risk management."

Economic activity goes through periods of boom and then fall during business cycles. Both the general welfare of society and the welfare of private enterprises are impacted by these developments. Changes in a broad economic measure, such as Real Gross Domestic Product, are generally examined to determine how business cycles have changed through time. Many macroeconomic indicators have widespread upswings and downswings, which are classic examples of business cycle fluctuations. Each expansion/recession episode's duration and intensity change over time. Usually, their periodicity lasts for two to ten years. As in, their mathematical methodology, which employs a Bayesian statistical paradigm, may really include such flexible knowledge about the frequency of business cycles.

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Problem 5-3A Part 2 2. Post transactions to the following accounts: Cash, Accounts Receivable, and Allowance for Uncollectible Accounts.

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Accounts for cash, accounts payable, and allowance for uncollectible accounts should all receive transactions. Cash Accounts. The provision, also known as a bad debt reserve .

What does it mean to post transaction accounting?

In accounting, the term "posting" describes the process of transferring a transaction entry from a journal to a general ledger, which houses all of a company's financial accounts. A ledger organises transactions by accounts, such as assets or liabilities, while a journal records items in a chronological order. All transactions are transferred from all Journals (transaction registers) to the Chart of Accounts through a process known as "post transactions" (General Ledger).

Moving one or more transactions from a module into a Journal is another definition of "posting." The general ledger must be filled out with specific accounting transactions before being posted. It entails gathering financial transactions from their current location in specialised ledgers and moving the data into the general ledger. Post each transaction from your journal to your general ledger to keep your records up to date.

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What is opportunity cost long answer?

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Opportunity costs are the possible advantages that a person, investor, or company forgoes while deciding between two options. Opportunity costs are by definition invisible, making it simple to ignore them.

The value or advantage lost by selecting one activity over another is referred to as the opportunity cost in microeconomic theory. More specifically, it means that once you choose one activity, you can no longer choose another. The best activity is the one that, once opportunity costs are deducted, delivers the highest return in comparison to all other activities. For instance, if you possess a car that you use just for personal transportation, you are not permitted to rent it out, but if you do, you are not allowed to use it for personal transportation either. If the cost of transportation without a car is more than the cost of renting one,

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Christmas Tree Park, and Lumber Value enter into an oral contract for the sale of a lumber mill and the land on which it is situated from Christmas Tree Park to Lumber Value. Under the Statute of Frauds, this contract is enforceable by

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Under the Statute of Frauds, this contract is enforceable by none of the choices.

What Is the Statute of Frauds?

A legal principle known as the statute of frauds mandates that some kinds of contracts be in writing. Land sales, deals involving items costing more than $500, and agreements lasting a year or longer are some of the contracts that are most frequently subject to the statute of frauds.

The statute of frauds is designed to stop fraud and other types of harm. Evidentiary and cautionary are common terms used to characterize these goals. The statute of frauds serves an evidential purpose by offering proof that a valid, binding contract is in place. Each party should be more focused, serious, and thoughtful when transacting as a result of the statute of fraud's cautionary purpose.

The statute of frauds was predominantly established in the United States as common law, or unwritten law. In most states, it has since been institutionalized by statutes. The defendant may bring up the statute of frauds as a defense in a breach of contract dispute if it is relevant because it is the plaintiff who has the burden of proof. It is the burden of the plaintiff to prove that a legal contract actually existed.

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With respect to factors of production, which of the following statements is not true?
a. Factors of production are also known as resources.
b. In order to produce any good or services, it is necessary to have factors of production.
c. Factors of production include land, labor, capital, and entrepreneurship.
d. Only those resources that are privately owned are counted as factors of production.

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With respect to factors of production, which of the following statements is not true a. Factors of production are also known as resources.

Production is the process of combining several inputs, both material and intangible (such plans or information) (such as metal, wood, glass, or polymers). In an ideal scenario, this output would be a good or valuable product or service. [1] The area of economics that focuses on production is called production theory, and it is closely related to the area of economics known as consumption (or consumer) theory.

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When an owner uses resources they own in a business, that usage should be considered a. a direct cost b. an implicit cost c. not counted in economic profit calculations d. an explicit cost

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an owner uses resources they own in a business, that usage should be considered an implicit cost.

What does implicit capital cost mean?

Any cost that has already been incurred but hasn't been expressly stated or isn't being reported as a distinct expense is an implicit cost. It captures the opportunity value that arises when a company spends internal capital for a project without receiving a specific payment for resource utilization. Implicit costs include things like the decline in interest earnings on investments and the depreciation of equipment for capital projects. Intangible expenses are those that are difficult to quantify, such as the time that an owner devotes to the upkeep of a business rather than using it for other purposes.

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The spinners are spun and the values are added together, What is the probability the sum is equal to ... 9

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The number of possibilities that can occur on spinner is 9. So that the probability of the sum is equal to nine is [tex]\frac{2}{9}[/tex].

Probability in mathematic generally can be defined as possibility. Probability is a branch of mathematics that deals with the occurrence of a random event. The value of probability is expressed from zero to one.

If two spinners are spun together, the probability that will occur are:

(2,1)(2,3)(2,5)(4,1)(4,3)(4,5)(6,1)(6,3)(6,5)

The number of possibilities that can occur is 9. And the sum of the probability of two spinner if the values added together and equal to nine is 2, there are (6,3) and (5,4).

So that the probability of the sum is equal to nine is [tex]\frac{2}{9}[/tex].

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A town has a total assessed valuation of $32,000,000 and exemptions of $7,000,000. What is the tax base

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Taxes are essentially forced contributions from the populace to the government; in this case, the tax base is $25,000,000.

A tax base example is what?

The whole dollar amount of taxable income, in the case of the personal income tax, or the total dollar value of real estate, in the case of the real property tax, are two examples of tax bases that are often measured as a dollar amount to which a tax rate is applied.

To expand the tax base, what does that mean?

When a tax base grows, more people and companies are contributing to the expenses of maintaining the community. The proportion of taxes that fall on an individual decreases as the tax base expands as a result of higher sales.

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In computing the realized gain in a like-kind exchange, it is necessary to compare A) the fair market value of the assets received with the adjusted basis of the assets given up. B) the adjusted basis of the assets received with the fair market value of the assets given up. C) the fair market value of the assets received with the fair market value of the assets given up. D) the adjusted basis of the assets received with the adjusted basis of the assets given up.

Answers

The correct answer to the question is Option A- the fair market value of the assets received with the adjusted basis of the assets given up.

What is Fair market value?

A product's fair market value, or FMV, is the price it would fetch on the open market if both parties were given a reasonable amount of time to complete the transaction, were acting in their own best interests, and were not under undue pressure.

Typically, the average of three or more homes that are comparable is used to determine the home's fair market value. A popular method for determining a home's fair market value, or the price a buyer is willing to pay in a given market, is the comps strategy.

The fair market value of a property is decided by both the buyer and the seller. The real estate transactions that take place within a community are looked at by the appraiser or assessor, who then determines the factors that influence the final sale prices.

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What is the outcome of enforcing contracts and property rights in a market system?
a. Increased economic activity
b. Decreased economic activity
c. No change or no effect on economic activity
d. An unpredictable but definite effect on economic activity

Answers

In a market system, more economic activity results from the enforcement of contracts and property rights.

What do you know about the economy?

Economic activity is defined as the process of producing a certain good or service using resources such as labor, capital equipment, manufacturing processes, or intermediary items. An economic activity is therefore defined by the manufacturing process, resource input, and product output (goods or services).The term "activity" as used in this context can refer to a single simple task, like weaving, or it can refer to a large range of related sub-processes, each of which is stated in a different classification category. If the manufacturing process is configured as an integrated series of significant components within a single statistical unit, the entire combination is treated as one activity.

Thus, choice A is the best one.

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Which of the following is the most important competitive factor in determining a company's ability to secure contracts to supply large multi-outlet retailers private-label footwear to chain retailers in a particular geographic region?
A. the number of special high-performance features the company agrees to incorporate in the private-label footwear models it supplies
B. the S/Q ratings on the private-label footwear the company offers to supply
C. the price at which the company offers to supply retailers with private-label pairs
D. the company's brand reputation
E. the amount and caliber of merchandising and promotional support the company offers to provide

Answers

One of the following is the proper pricing that the corporation provides to sell private-label pairs to retailers.

Why is the firm called?

Due to the desire among its employees to create value, a business is referred to as a firm. Latin is the origin of the word "produce," which means to lead forth or bring forth. Old French, which means compaignie or companionship, is where the word "company" first appeared. Additionally, the word "business" has its roots in Old English, which combines busy with -ness.

What is the short definition of a company?

A corporate structure that is distinct from its owners legally is a corporation. Due to additional reporting standards and increased legal duties, the business structure is now more complicated and has greater setup and administration expenses.

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Meg Whitman, former CEO of HP, stated that early in her career she gained credibility and displayed competence through her focus on Multiple choice question. creating a successful track record. giving great presentations. giving many large gifts. keeping conversations short.

Answers

A) Meg Whitman, the former CEO of HP, stated that her focus on building a successful track record helped her establish credibility early on and demonstrate competence.

What aids you in selecting each correct response on the fair test in communications?

A method for assessing your communications is the FAIR test. It enables you to evaluate how effectively you have presented the facts; how effectively you have granted access to your reasons, logic, and data; how thoroughly you have investigated effects on stakeholders; and how respectfully you have behaved.

What are some of the reasons a business might ask employees to sign confidentiality agreements?

You might ask your employees to sign an employee confidentiality agreement to prevent them from disclosing confidential information that could put your company's reputation at risk. Employee confidentiality agreements are used by businesses to safeguard innovative concepts, efficient procedures, distinctive goods, and customer data.

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Which of the following strategies is not an effective strategy to reduce monopoly inefficiency? a. antitrust laws b. price discrimination c. doing nothing d. breaking up a natural monopoly into more than one firm

Answers

The inefficiency of monopolies cannot be reduced through price discrimination.

Monopoly is a cooperative board game with an economics theme. Players travel around the game board by rolling two dice in order to purchase, trade, and develop real estate, including homes and hotels. Players try to bankrupt their competitors by collecting rent from them. Tax squares, Chance cards, and Community Chest cards are additional methods to win or lose money. Each time a player passes a "Go" signal, they are rewarded. They can also be detained and prevented from being released unless one of three requirements is satisfied. There are house rules, numerous spin-offs, countless editions, and connected media. With local licenses in more than 103 nations and printing in more than 37 languages, Monopoly has been ingrained in global popular culture.

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What are the advantages and disadvantages of market economic system?

Answers

Benefits of a  request frugality include increased effectiveness,  product, and invention. Disadvantages include monopolies, no government intervention, poor working conditions, and severance.  

Advantages A wide variety of quality goods and services will be produced as different enterprises will contend with satisfying consumer wants and making gains. Quality is assured to make sure that consumers buy from them. There's consumer sovereignty.  

Command frugality advantages include low situations of inequality and severance and the common ideal of replacing profit as monopolies. Command frugality disadvantages include a lack of competition, leading to a lack of invention and effectiveness.

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Computing real exchange rates Consider a basket of consumer goods that costs $100 in the United States. The same basket of goods costs 300 in Malaysia. Holding constant the cost of the basket in each country, compute the real exchange rates that would result from the two nominal exchange rates in the following table. Cost of Basket in Cost of Basket in Nominal Exchange U.S. Malaysla Rate Real Exchange Rate (Dollars) (Ringgit) (Ringgit per dollar) (Baskets of Malaysian goods per basket of U.S goods) 100 300 4.50 100 300 12.00

Answers

The real exchange rate is 4. The real exchange rate shows how the price of a basket of goods abroad has changed over time in comparison to the price of the same basket at home.

What is Real Exchange Rate?

The nominal exchange rate (e) divided by the price-to-price ratio (P/P*) between the two nations is the real exchange rate (RER). As a result, the RER is eP*/P. Consider Germany's situation in relation to the United States.

The current price that consumers and businesses will pay to purchase a foreign product using their home currencies is known as the real exchange rate. For instance, if the current U.S.-Britain exchange rate was $138 U.S. dollars for one pound, an American consumer would require $1.38 to purchase one pound's worth of goods.

After conversion into a foreign currency, the real rate indicates how much more or fewer goods and services can be purchased abroad for a given amount than on the domestic market. In practice, changes in the real exchange rate are more important than changes in its absolute level.

the Formula of the real exchange rate is;

Nominal Exchange Rate ×Price prevailing in foreign country / Price prevailing in the domestic country

4.5 * 100/300= 1.5

So, 1.5 baskets of Malaysian goods per basket of U.S. goods.

When the nominal exchange rate is 12 Ringgit per dollar, the real exchange rate = 12 * 100/300 =4

Thus, 4 Malaysian goods per American goods basket.

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