Which of the following best defines an optimum currency area?
A) a group of nations sharing the same currency
B) a group of regions in close proximity to each other.
C) a group of regions who operate under similar economic policies.
D) a group of regions with economies closely linked by factor mobility and by trade in goods and services
E) a group of nations that engage in free trade with each other
D
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Gasoline and bicycles are substitutes in consumption. Suppose we increase the federal gasoline tax to $1 per gallon
Initially, the gasoline price rises due to the tax, and the demand curve for bicycles shifts rightward because these goods are substitutes. Then, the bicycle price rises, and the demand curve for gasoline shifts rightward. Assuming the general equilibrium is achieved in both markets after these two steps, which of the following statements is NOT true? A) Partial equilibrium analysis only focuses in the first-round changes in the gasoline market (ignoring the secondary effects that arise from changes in the bicycle market). B) Partial equilibrium analysis would predict a larger shift in the price and quantity demanded for gasoline than a general equilibrium analysis. C) The price increase in gasoline is larger under the general equilibrium approach, but the change in the quantity of gasoline demanded is smaller than under partial equilibrium analysis. D) All of these statements are true.
The goal of an unbalanced economic development strategy is to create
a. a political revolution or change that sparks economic development b. labor unions in nonunionized markets that unbalances those markets c. more government jobs for workers in the modern sector d. high profit in the private sector and low profit in the government sector e. forward and backward linkages that provide mutually sustaining markets
Speculative bubbles may arise in part because the value of the stock to a stockholder depends on the final sale price
a. True b. False Indicate whether the statement is true or false
According to the Fisher effect, if inflation rises then the nominal interest rate rises
a. True b. False Indicate whether the statement is true or false