Measuring the rate of inflation using a market basket that excludes food and energy prices is preferred by some analysts because this measure, called core inflation,:
A. provides a real, rather than a nominal, rate of inflation.
B. gives a better measure of ongoing, sustained price changes.
C. is more consistent with measures of inflation used in other countries.
D. fluctuates more than measures of inflation that include food and energy prices.
Ans: B. gives a better measure of ongoing, sustained price changes.
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Product development is efficient if the
A) new product actually brings great benefits to the consumer. B) producer's marginal cost of product development equals the consumer's marginal benefit. C) producer surplus from selling the product equals the consumer surplus. D) average cost of the product development equals the average revenue generated.
Under a flexible exchange rate system, one factor that does NOT directly affect rates of exchange is
A) changes in the inflation rate in each country. B) changes in productivity in each country. C) changes in gold holdings in each country. D) changes in economic stability in each country.
If labor is the only variable input, a firm's labor demand curve is
a. labor's marginal product curve b. the upward-sloping portion of its marginal revenue product of labor curve c. the downward-sloping portion of its marginal revenue product of labor curve d. the marginal revenue product of labor curve above the reservation wage rate e. the marginal revenue product of labor curve above the average variable cost curve
What is the main reason why monetary policy has a stronger effect in an open economy than in a closed economy?
a. Changes in the price level affect net exports. b. Changes in the price level affect exchange rates. c. Changes in exchange rates affect output. d. Changes in the interest rate affect exchange rates which, in turn, affect net exports. e. Changes in exchange rates affect the interest rate which, in turn, affects net exports.