The terms of trade refers to
A. the documents that two countries sign in order to facilitate trade.
B. the conditions imposed by the importing country regarding the quality of the imported goods.
C. the ratio at which one country trades a domestic product for an imported product.
D. the exchange rate determined by the exporting and the importing countries.
Answer: C
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To eliminate an inflationary gap using fiscal policy, the government could
A) increase government expenditure on goods and services and simultaneously increase taxes by an equal amount. B) only decrease taxes. C) increase government expenditure on goods and services and simultaneously decrease taxes by an equal amount. D) decrease the quantity of money. E) increase taxes.
When a temporary negative supply shock hits the economy, then in the short-run ________
A) if the central bank focuses on stabilizing output, it cannot stabilize inflation B) if the central bank focuses on stabilizing inflation, it cannot stabilize output C) the divine coincidence does not hold D) all of the above E) none of the above
All of the following generate positive externalities EXCEPT
A) public health programs. B) lower marginal tax rates. C) requiring proof of inoculation before entering college. D) requiring proof of inoculation before entering elementary school.
Answer the following statements true (T) or false (F)
1. The current base year for the CPI is 1985. 2. If a worker’s money wage increases at a faster pace than the CPI, his or her real wage will rise. 3. As income or spending patterns change substantially, it is wise to change the base year of the CPI. 4. The CPI does not necessarily make adjustments for improvement in the quality of goods and services in the market basket. 5. Real wages are determined by multiplying money wages by the CPI.