If prices in the United States rose, which of the following could be directly attributed to the international substitution effect?
a. Americans reduce their purchases of Japanese cars.
b. Australians buy more American surfboards.
c. Europeans purchase fewer American-made personal computers.
d. Americans sell more wheat to India.
C
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If the natural unemployment rate is 4 percent and potential GDP is $30 billion, then according to Okun's Law, when the unemployment rate falls to 3 percent, real GDP
A) decreases to $29.4 billion. B) first decreases by 4 percent and then increases by 4 percent. C) increases to $60 billion. D) increases to $30.6 billion. E) remains constant at $30 billion.
Negative supply shocks can have a tendency to ________ costs of production and ________ the inflation rate
A) increase; increase B) increase; decrease C) decrease; increase D) decrease; decrease
Elena Johnson owns 100 shares of Funky Foods, which has 100,000 shares of stock outstanding. Funky Foods is expected to earn $1 million in after-tax profits every year forever. The interest rate is 5 percent (0.05) per year. According to the principle of asset valuation, what is the value of Elena's shares?
a. $200,000 b. $10,000 c. $20,000 d. $100,000 e. $2,000
Consider a technological improvement that raises labor's marginal product. Explain why the subsequent effect on the labor market is different when the improvement is temporary as compared to when it is permanent.
What will be an ideal response?