Suppose the government of South Island fixes the exchange rate of its currency, the Islandia, in terms of the U.S. dollar. Initially the exchange rate is set at $1 per Islandia. Later the government changes the exchange rate to $2 per Islandia. This is an example of a(n):
A. appreciation.
B. depreciation.
C. revaluation.
D. devaluation.
Answer: C
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Ricardian Equivalence theory is based on the view that ________
A) the impact of a tax cut is felt primarily on domestic consumption spending B) households tend to take future events into account when engaging in economic decision-making C) the price of a commodity is negatively related to the quantity of that good demanded D) a trade-off exists between the use of monetary and fiscal policy in influencing the level of income
You purchased two stocks that are perfectly negatively correlated
A) Your portfolio is well diversified, so you should face no risk whatsoever. B) Even though you diversified the idiosyncratic risk away, your portfolio is still affected by systemic risks like a stock market crash. C) Even though you diversified the systemic risk away, your portfolio is still affected by idiosyncratic risks like a stock market crash. D) Your portfolio is not diversified; thus you face no systemic risk.
When a firm hires labor up to the point where the wage is equal to the value of the marginal product of labor, it is
a. minimizing labor costs. b. guaranteeing that labor costs do not exceed fixed costs. c. maximizing the number of workers it can hire and still experience a positive profit. d. maximizing profit.
Which of the following is an example of excessive influencing activities?
A. Estimating the elasticity of demand for your firm's product B. Cancelling a meeting with a client to play golf with your superiors C. Taking clients out for dinner D. Informing the manufacturing division of defects in a shipment