ESE 2025Q67
Q: The shadow price of a unit of foreign exchange is (a) Σᵢ=1ⁿ Fᵢ Qᵢ Pᵢ (b) Σᵢ=1ⁿ Fᵢ + Qᵢ + Pᵢ (c) Σᵢ=1ⁿ Fᵢ + Qᵢ − Pᵢ (d) Σᵢ=1ⁿ Fᵢ − Qᵢ + Pᵢ where: Pᵢ is domestic market-clearing price of commodity i Qᵢ is quantity of commodity i bought with one unit foreign exchange Fᵢ is fraction of foreign exchange, at margin spent on importing commodity
(a)Σᵢ=1ⁿ Fᵢ Qᵢ Pᵢ
(b)Σᵢ=1ⁿ Fᵢ + Qᵢ + Pᵢ
(c)Σᵢ=1ⁿ Fᵢ + Qᵢ − Pᵢ
(d)Σᵢ=1ⁿ Fᵢ − Qᵢ + Pᵢ
Correct Answer: (a)
Detailed explanation coming soon.