The Big Mac Index uses the price of a Big Mac in local currencies around the world as a way of testing the purchasing power parity theory. Which of the following is a partial explanation for why the PPP theory does not apply to the Big Mac Index?
a. Wages do not differ across countries
b. Trade barriers, such as tariffs and quotas on beef, may distort local prices
c. Taxes do not distort local prices
d. Rent does not vary substantially across countries
e. The Big Mac is traded internationally
B
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Answer the following statements true (T) or false (F)
1. As the economy expands, it requires less and less investment. 2. Keynes described a horizontal short-run aggregate supply curve when output can be increased by using unemployed resources. 3. As income increases, the absolute level of planned consumption will increase. 4. Keynes recommended the use of government deficit spending to overcome widespread unemployment. 5. A composite aggregate supply curve is horizontal at low levels of output, then upward sloping for higher levels of output until output reaches capacity and the AS curve becomes vertical.
A consumer maximizes utility at a point where multiple indifference curves intersect the budget line
a. True b. False Indicate whether the statement is true or false
Jonah lives in a small town where there is only one Mexican restaurant. Which of the following is likely to be true about the price elasticity of demand for meals at the Mexican restaurant?
A) Demand is likely to be perfectly inelastic. B) Demand is likely to be perfectly elastic. C) Demand is likely to be relatively elastic. D) Demand is likely to be relatively inelastic.
In an effort to serve consumers who have become more health conscious, a number of firms have begun developing small electronic devices which allow people to monitor various health conditions
These firms are reacting to which of the three key economic ideas? A) Optimal decisions are made at the margin. B) Firms attempt to maximize revenues. C) People respond to economic incentives. D) People are rational.