To ensure that a nominal payment represents a constant level of purchasing power over time, one should:
A. add the price index to it.
B. divide it by the price index.
C. subtract the price index from it.
D. increase it by a percentage equal to the rate of inflation for that year.
Answer: D
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Another way to state the efficient markets hypothesis is: in an efficient market
A) unexploited profit opportunities will be quickly eliminated. B) unexploited profit opportunities will never exist. C) all prices can be accurately predicted. D) every financial market participant must be well informed about securities.
An analysis of the American economy since 1960 shows that there is a stable relationship between inflation and unemployment
A) only in the short run. B) only in the long run. C) in neither the short run nor the long run. D) in both the short run and the long run.
According to the rational choice model developed in this chapter, which statement below is false?
A. Cash grants are always better than in-kind gifts. B. Individual preference patterns do not change because prices change. C. Consumers behave as if they did cost-benefit analysis on every purchase. D. People would be less happy if they exchanged money rather than things at Christmas.
Ajax has just discovered that the marginal revenue product generated by the last worker hired was $125 while the marginal factor cost was $85. What should Ajax do?
A) Leave the level of production unchanged. B) Increase the amount produced. C) Reduce the amount produced. D) Collect more information before making a decision.