How does an economy represented by a straight-line production possibilities curve differ from one represented by a traditional production possibilities curve with a bowed shape?
A) In the economy represented by a straight-line production possibilities curve, there is no opportunity cost.
B) In the economy represented by a straight-line production possibilities curve, neither good is scarce.
C) In the economy represented by a straight-line production possibilities curve, the law of increasing relative cost does not apply.
D) In the economy represented by a straight-line production possibilities curve, changing the amount of resources devoted to the production of each good will not alter the amount of each good actually produced.
C
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How does the aggregate demand curve differ from a demand curve for, say, bananas?
What will be an ideal response?
Suppose we were analyzing the pound per Swiss franc foreign exchange market. If there is the expectation that the Swiss franc will rise in value in the near future, then in the spot market:
a. The supply of Swiss francs in the foreign exchange market falls, and the demand for Swiss francs in the foreign exchange market falls, causing an uncertain change in the value of the Swiss franc. b. The supply of Swiss francs in the foreign exchange market falls, and the demand for Swiss francs in the foreign exchange market rises, causing an appreciation of the Swiss franc. c. The supply of Swiss francs in the foreign exchange market rises, and the demand for Swiss francs in the foreign exchange market rises, causing an uncertain change in the value of the Swiss franc. d. The supply of Swiss francs in the foreign exchange market rises, and the demand for Swiss francs in the foreign exchange market falls, causing a depreciation of the Swiss franc. e. Neither supply nor demand in the foreign exchange market change because relative international prices influence trade flows and not the exchange rate.
The Federal Insurance Contribution Act (FICA) tax is an example of a(n)
a. payroll tax. b. sales tax. c. farm subsidy. d. income subsidy.
When the U.S. exchange rate rises, the trade deficit will:
A. be balanced by an increase in net exports. B. remain unaffected. C. usually rise, too. D. usually fall.