The law of one price states that if transportation costs are relatively small, then the:
A. price of an internationally traded commodity must be the same in all locations.
B. nominal exchange rates for every country's currency must be equal.
C. nominal exchange rate for a currency must equal the real exchange rate for that currency.
D. producer with the lowest opportunity cost should be the only producer any commodity.
Answer: A
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The aggregate demand curve is
A) upward sloping. B) a vertical line at potential output. C) a horizontal line at the current price level. D) downward sloping.
Suppose autonomous consumption decreases. This reduction in autonomous consumption will cause which of the following to occur?
A) The consumption function shifts down. B) The consumption function shifts up. C) The consumption function becomes steeper. D) The consumption function becomes less steep.
________ recessions pose major macropolicy dilemmas.
Fill in the blank(s) with the appropriate word(s).
Two reasons savers keep deposits at banks are to:
A. secure mortgages and to purchase stocks. B. lower interest rates and to increase the money supply. C. equalize loan supply and demand and to earn interest. D. earn a return on their savings and to facilitate making payments.