Suppose over the last year that the price of iron ore increased from $1,200 a ton to $1,275 a ton. Over the same time a measure of the overall price level increased from 150 to 156 . The price of iron ore increased by
a. less than inflation, so it became less scarce.
b. less than inflation, so it became more scarce.
c. more than inflation, so it became more scarce.
d. more than inflation, so it became less scarce.
c
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A system of barter has substantial transactions costs because
A) taxes under such a system are generally a large fraction of the value of output. B) traders must spend considerable time searching for trading partners. C) the uncertainties of trade result in high legal fees being incurred to draw up binding contracts. D) the uncertainties of trade result in high insurance premiums.
The U.S. Treasury estimates that the fraction of U.S. currency held outside the United States is:
A. about half. B. between one-half and two-thirds. C. less than 10%. D. about one-fourth.
Real GDP values current output of goods and services at their current prices.
Answer the following statement true (T) or false (F)
Suppose a risk-neutral power plant needs 10,000 tons of coal for its operations next month. It is uncertain about the future price of coal. Today it sells for $60 a ton but next month it could be $50 or $70 (with equal probability). How much would the power plant be willing to pay today for an option to buy a ton of coal next month at today's price? (Ignore discounting over the short period of a
month.) a. 5 b. 4 c. 3 d. 0