Question 16 (4 marks)
Suppose inflation is higher in South Africa over the next few months than in foreign countries, and exchange rates are given in terms of how much foreign currency a dollar buys or how many foreign goods are equivalent in cost to one South Africa good. According to purchasing-power parity, which of the following should we expect to see?
a) Both the real and nominal exchange rates appreciate.
b) Both the real and nominal exchange rates depreciate.
c) Only the nominal exchange rate depreciates.
d) Only the real exchange rate appreciates.
Question 17 (4 marks)
If there is a sharp increase in the number of workers, holding all other things constant, which of the following is likely in the short term?
a) increase real GDP per person but decrease real GDP
b) raise real GDP but decrease real GDP per person
c) raise both real GDP and real GDP per person
d) decrease both real GDP and real GDP per person
Question 18 (4 marks)
Which one of the following is not a reason why import tariffs (duties or taxes) are imposed on products imported into a country?
a) to protect domestic firms against competition from imports
b) to raise government revenue
c) to discourage consumption of goods that are seen as threats to human health
d) to provide revenue source for foreign country