Answer the following statement(s) true (T) or false (F)
1. A rise in absolute prices guarantees that relative prices will rise as well.
2. If the relative price of a gallon of water in terms of milk increases from 1 gallon to 1.5 gallons of milk, then the relative price of milk has fallen.
3. If all absolute prices increase by 10%, then the economy's relative prices will remain unchanged.
4. An increase in the price of gasoline relative to telephones will cause inflation.
5. When silk is shipped from China to Atlanta, transportation costs will make the price of high-quality silk relative to low-quality silk higher in Atlanta than in China
1. False
2. True
3. True
4. False
5. False
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Suppose the government cuts taxes. We would expect interest rates to ________ and the dollar to ________ in foreign exchange markets
A) rise; depreciate B) fall; appreciate C) rise; appreciate D) fall; depreciate
If the costs of negotiating and enforcing contracts are high relative to the benefits, buyers and sellers will have incentives to make economically efficient arrangements that increase value
Indicate whether the statement is true or false
A cost associated with an economic depression is
a. the loss of goods and services that are not produced. b. the loss of individual income to unemployed workers. c. a possible deterioration of working skills of unemployed workers. d. All of these.
The behavior of market prices over time indicates that natural resources are
a. a limit to economic growth. b. unrelated to economic growth. c. not a limit to economic growth. d. the major determinant of productivity.