Along its production possibilities frontier (PPF) an economy can produce 0X and 15Y, 10X and 10Y, 20X and 5Y, or 30X and 0Y. It follows that the PPF is
What will be an ideal response?
a downward-sloping straight line.
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If John can produce 10 chairs or 20 lamps during a week while Mary can produce 12 chairs or 22 lamps in the same time, who has the absolute advantage in producing each good?
A) Mary in producing both goods B) John in producing both goods C) Mary in producing chairs, John in producing lamps D) John in producing chairs, Mary in producing lamps E) Both Mary and John in both goods
A random walk model can more accurately predict exchange rates as compared to a sophisticated forecast
A) always. B) for forecasts up to a year away. C) for forecasts longer than a year away. D) never. E) because of the predictability of exchange rates.
Why does the payments system continue to change over time?
What will be an ideal response?
According to the adaptive expectations hypothesis,
a. inflation will cause the long-run unemployment rate to decline. b. the economic record during the current period strongly influences decision-maker expectations about the future. c. decision makers will consider the expected impact of policy changes when forming their expectations about the future rate of inflation. d. future inflation will adapt to conform with the expectations of decision makers.