In a market system, which component conveys information about what is relatively scarce and what is relatively abundant?
A. the number of consumers
B. market price
C. the number of producers
D. the amount of resources used in producing the goods and services
Answer: B
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Advocates of flexible exchange rates claim that under flexible exchange rates
A) enhanced control over fiscal policy would allow countries to dismantle their distorting barriers to international payments. B) reduced control over monetary policy would allow countries to dismantle their distorting barriers to international payments. C) enhanced control over monetary policy would allow countries to increase their distorting barriers to international payments. D) enhanced control over monetary policy would allow countries to dismantle their distorting barriers to international payments. E) enhanced control over monetary policy would destabilize exchange rates.
The Big Mac Index uses the price of a Big Mac in local currencies around the world as a way of testing the purchasing power parity theory. Which of the following is a partial explanation for why the PPP theory does not apply to the Big Mac Index?
a. Wages do not differ across countries b. Trade barriers, such as tariffs and quotas on beef, may distort local prices c. Taxes do not distort local prices d. Rent does not vary substantially across countries e. The Big Mac is traded internationally
If an increase in the price of Product X causes an increase in the demand for Product Y, we can conclude that: a. Products X and Y are complements. b. Products X and Y are substitutes
c. Products X and Y are normal goods. d. The price of Product Y will decrease.
Which of the following causes an increase in demand for a normal good?
A) increase in the price of a substitute B) increase in the price of a complement C) decrease in price D) decrease in income