Suppose that opportunity costs are constant and that Fred can either bake a maximum of six pies or three cakes in a day. Ethel can either produce a maximum of eight pies or two cakes in a day. Fred's opportunity cost to produce one cake is
A) one-half pie.
B) two pies.
C) six pies.
D) four pies.
Answer: B
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If a country's currency has a market driven value that is higher than economic theory would suggest, the currency is considered to be
A) overvalued. B) undervalued. C) overestimated. D) in arbitrage.
Automatic stabilizers are
A) provisions that cause changes in government spending and taxes without new action by Congress or the President. B) policies set by certain committees in Congress. C) tools used by the President's Council of Economic Advisers. D) provisions that cause the aggregate supply curve to be upward sloping.
Using the income approach, an estimate of the value of capital worn out producing GDP is:
a. indirect business taxes. b. capital consumption allowance or depreciation. c. gross private domestic investment. d. capital erosion estimate.
Suppose a country abandons a no-trade policy in favor of a free-trade policy. If, as a result, the domestic price of pistachios decreases to equal the world price of pistachios, then
a. that country becomes an exporter of pistachios. b. that country has a comparative advantage in producing pistachios. c. at the world price, the quantity of pistachios demanded in that country exceeds the quantity of pistachios supplied in that country. d. All of the above are correct.