Suppose that monetary policy becomes more expansionary, and as a result, the future rate of inflation is higher. Will this be good for the stock market?
a. Yes; the inflation will lead to higher wages, and this will be good for both the economy and the stock market.
b. No; the inflation will lead to higher nominal interest rates, and this will reduce the present value of the future net earnings derived from stocks.
c. Yes; the inflation rate will reduce the long-run rate of unemployment, and this will be good for the stock market.
d. No; the expansionary monetary policy will lead to lower real interest rates, and this is generally bad for both the economy and the stock market.
B
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Included among the Fed's primary goals to promote a well-functioning economy are
A) high employment, low inflation, and a high foreign-exchange value of the dollar. B) price stability, economic growth, and a high reserve ratio. C) low government budget deficits, interest rate stability, and no inflation. D) a low rate of unemployment, a low and stable inflation rate, and financial market stability.
In the employment of any resource, a firm should
A) equate marginal revenue product with the cost of the additional resource. B) hire each input unit that adds more to revenue than it adds to costs. C) hire each input unit provided its marginal physical product is greater than zero. D) A and B are both correct.
"More productive workers receive higher wages than less productive workers." This observation is a major flaw in which of the following arguments for protectionism?
a. The infant industry argument. b. The national security argument. c. The employment argument. d. The cheap foreign labor argument.
Karl can produce either 10 tons of oranges or 5 tons of apples in a year, while Adam can produce either 5 tons of oranges or 10 tons of apples. Refer to Exhibit 28-2. Which of the following is true?
A. Adam has an absolute advantage in oranges and a comparative advantage in apples. B. Karl has an absolute advantage in oranges and a comparative advantage in oranges. C. Karl has an absolute advantage in both apples and oranges. D. Karl has an absolute advantage and a comparative advantage in apples.