Suppose a cup of coffee at the campus coffee shop is $2.50 and a cup of hot tea is $1.25 . Suppose a student's beverage budget is $20 per week. Suppose the student simply prefers more caffeine to less and that the tea sold has the same amount of caffeine as the coffee. The student will buy
a. all tea.
b. all coffee.
c. a mix of coffee and tea.
d. quantities that cannot be determined from the information given here.
a
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Use the following graph to answer the next question.
In the diagram, Qf is the full-employment output. An expansionary fiscal policy would be most appropriate and needed if the economy's present aggregate demand curve were at
A. AD0. B. AD1. C. AD2. D. AD3.
One disadvantage of a fixed exchange rate system compared to a floating or managed float exchange rate system is
A) it more difficult for central banks to control inflation. B) it does not allow for government intervention. C) it can worsen inflation if domestic prices of imports rise quickly. D) it eliminates the possibility of depreciation during a recession.
Let the production function be q=ALaKb. The function exhibits constant returns to scale if
A) a + b = 1. B) a + b > 1. C) a + b < 1. D) Cannot be determined with the information given.
In order to assess the relationship between the real exchange rate and total exports for any nation, one must construct a real effective exchange rate that measures:
a. a composite of each trading partner's real exchange rate change weighted by the share of trade. b. the exchange rate that would exist with no inflation and balanced trade. c. the average of all nominal exchange rates since we assume no inflation. d. nominal trade adjusted for inflation.