If you are in the business of selling chicken and the price of chicken and the price of beef both were to drop dramatically, what should you do with your inventory level of chicken?
A. Increase the inventory.
B. Keep it the same.
C. Get into the beef business.
D. Decrease the inventory.
Answer: A
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Federal Reserve Chairman Volcker's policy to fight inflation
A) led to the 1981-1983 recession, but was ultimately successful. B) led to the 1981-1983 recession, but did not end high inflation due to beggar-thy-neighbor effects. C) was perfectly complemented by Reagan's decrease in fiscal spending. D) led to the 1981-1983 recession and foretold the economic downturn in the mid-1990s. E) led to an immediate depreciation of the dollar.
When the rate of appreciation of the nominal exchange rate equals the foreign inflation rate minus the domestic inflation rate, we say there is
A) relative purchasing power parity. B) purchasing power parity. C) a Phillips curve. D) an aggregate supply shock.
Which of the following was an important source of economic stability during the two decades following the recovery from the 1982 recession?
a. countercyclical fiscal policy instituted by Congress b. a substantial increase in government spending as a share of the economy c. monetary policy that kept the inflation rate low and relatively steady d. balanced federal budgets throughout the period
When an economy is producing efficiently, it is
A. Getting the maximum goods and services possible from the available resources. B. Producing equal amounts of all goods. C. Experiencing decreasing opportunity costs. D. Producing a combination of goods and services beyond the production possibilities curve.