Which of the following is included in both the balance of trade and the balance of payments?
A) exports
B) earnings on domestic assets owned by foreign residents
C) international capital movements
D) earnings by domestic residents on assets located abroad
Answer: A
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Marginal utility theory predicts that if a consumer's income decreases, the consumer
A) buys fewer normal goods. B) buys fewer inferior goods. C) buys more of all goods. D) might either increase or decrease purchases of normal goods.
An extremely poor growing season in Idaho (a major potato-producing state) will be expected to cause
A. a decrease in the demand for potatoes. B. a decrease in the price of potatoes. C. an increase in the supply of potatoes. D. an increase in the price of potatoes.
Other fundamental things being equal, a decrease in the exchange rate value of domestic currency will cause the current account to
A. overshoot its long-run value. B. move toward a surplus. C. move toward a long-run deficit. D. equal the official settlements balance.
Suppose that a town has two major bottling plants. One of these bottling plants is unionized and the union has just negotiated a 7% wage increase each year for the next two years. Which of the following is most likely to occur?
A. The only effect will be that the price charged by the unionized bottling plant will increase to cover the additional costs of labor. B. The price of labor will change in both the unionized and nonunionized bottling plants, but no other input markets will be affected. C. The price of labor will change in both the unionized and nonunionized bottling plants. Employment of labor and other inputs is also likely to change in both bottling plants. D. The price of labor in the unionized bottling plant will increase, but there will be no changes in the price of labor in the nonunionized bottling plant.