Market economies produce outcomes that are
A. virtually ideal in all respects.
B. inferior to most other systems.
C. far from ideal, in some respects.
D. virtually indistinguishable from command economies.
Answer: C
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When the ratio of domestic prices to foreign prices rises:
A) the real exchange rate depreciates. B) the real exchange rate appreciates only when the nominal exchange rate appreciates. C) the real exchange rate appreciates only when the nominal exchange rate depreciates. D) the real exchange rate appreciates even when the nominal exchange rate is constant.
What is the main difference between a temporary and permanently negative supply shock?
A) The real interest rate immediately decreases after a temporary shock while it eventually increases after a permanent shock. B) Output increases right away after a temporary shock but the impact does not last whereas for a permanent shock output permanently decreases. C) A temporary shock will see a permanent increase in inflation while inflation will only rise temporarily after a permanent shock. D) all of the above E) none of the above
Stable money and prices are a key source of economic growth because
a. they allow activist policymakers to fine tune the economy. b. uncertainty and instability in prices will attract investors and business decision makers. c. price instability increases capital formation. d. price stability reduces the risks that accompany investment and other long-term commitments.
the law of comparative advantage.
What will be an ideal response?