1. Relative purchasing power parity assumes that

	a.	the nominal exchange rate is equal to one
	b.	the nominal exchange rate is constant over time
	c.	the real exchange rate is equal to one
	d.	the real exchange rate is constant over time

2. Economic theory predicts that net exports are

	a.	positively related to the nominal exchange rate
	b.	inversely related to the nominal exchange rate
	c.	positively related to the real exchange rate
	d.	inversely related to the real exchange rate

3. Relative PPP states that growth in the nominal exchange rate (E_{$/foreign currency}) is equal to the U.S.-Foreign

	a.	money supply growth differential
	b.	interest rate differential
	c.	real GDP growth differential
	d.	inflation differential

4. If a basket of goods costs 100 U.S. dollars in the U.S. and 200 U.S. dollars in Australia, then_U

	a.	the real exchange rate (qU.S./Australia) is equal to .5
	b.	the real exchange rate (qU.S./Australia) is equal to 2
	c.	the nominal exchange rate (EU.S./Australia) is equal to .5
	d.	the nominal exchange rate (EU.S./Australia) is equal to 2