The theory of portfolio choice suggests that the most important factor affecting the demand for domestic and foreign assets is
A) the level of trade and capital flows.
B) the expected return on these assets relative to one another.
C) the liquidity of these assets relative to one another.
D) the riskiness of these assets relative to one another.
B
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All of the following explain why purchasing power parity does not completely explain long-run fluctuations in exchange rates except
A) some countries impose barriers to trade. B) not all goods and services produced in any country are traded internationally. C) most countries have free markets with little, if any, government regulation. D) consumer preferences for goods and services differ across countries.
In the above graphs a direct relationship is shown by
A) Graph A. B) Graph B. C) Graph C. D) Graph D.
Discuss how economists calculate NI, PI and DI
Answer the following statements true (T) or false (F)
1. Whether a tax is shifted forward or backward depends on the price elasticizes of demand and supply. 2. The effect of a tax is the same thing as the incidence of the tax. 3. A direct tax is one that cannot be shifted. 4. A flat tax is a form of sales tax. 5. Value-added tax rates in Europe usually range between 5 and 10 percent.