Answer the following statement(s) true (T) or false (F)
1. A parallel shift in the budget line is caused by changes in the relative prices of the two goods.
2. Parallel shifts in the budget line are considered when deriving the demand curve for a good.
3. An Engel curve shows the relationship between price and quantity demanded.
4. Normal goods have upward-sloping Engel curves.
5. If an Engel curve is downward sloping, then one of the two goods must be inferior.
1. False
2. False
3. False
4. True
5. True
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The U.S. trade deficit has been mainly caused by:
A. unfair trade restrictions imposed by other countries on imports. B. production of inferior goods in the U.S. C. cheap labor in other countries. D. a low rate of national saving.
Externalities can cause the market mechanism to
a. malfunction. b. improve. c. operate efficiently. d. move up toward the production possibility curve.
To get a complete measure of the total spending on U.S.-produced final goods and services, one must adjust aggregate demand by
a. adding imports and subtracting exports. b. adding imports that are purchased by U.S. consumers. c. adding exports and subtracting imports. d. subtracting exports sold to foreigners.
Moral hazard can be avoided by:
A. removing the asymmetric information. B. employers monitoring employee effort. C. employers incentivizing employees to maintain consistent effort. D. All of these statements are true.