Which of the following is true of the classical model?
a. Changes in aggregate demand does not have any impact on the aggregate price level.
b. The aggregate supply curve is perfectly elastic.
c. An increase in aggregate demand increases the price level, output remaining unchanged.
d. Changes in aggregate demand determines the equilibrium output of the economy.
e. Real GDP and price level remain unchanged irrespective of changes in aggregate demand and supply.
c
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Suppose there are two countries (Home and Foreign) that produce two goods. Home's wages are 100% greater than Foreign's wages. Will trade be possible between Home and Foreign?
a. No, because Foreign's wages are lower than Home's wages. b. Yes, Foreign will be able to export both products to Home. c. Yes, as long as Home's marginal productivity of labor in one product is at least 100% higher than Foreign's marginal productivity of labor in the same product. d. No, because prices will be the same in each country.
If one fails to account for implicit costs in decision making, then applying the cost-benefit rule will be flawed because:
A. the benefits will be overstated. B. the costs will be understated. C. the costs will be overstated. D. the benefits will be understated.
According to Adam Smith's theory of absolute advantage, who benefits from engaging in trade
What will be an ideal response?
Which of the following is associated with a contractionary monetary policy?
A. lowering the required reserve ratio B. raising bond prices C. selling bonds D. lowering the differential between the discount rate and the federal funds rate