The theory of international exchange that holds that exchange rates are set so that the prices of ________ goods in different countries is ________ is the purchasing power parity theory.
A. similar; the same
B. nondurable; negotiable
C. durable; fixed
D. different; the same
Answer: A
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Which of the following cannot be classified as a market structure?
a. Perfect Competition b. Monopoly c. All of the above d. None of the above
How do participants in an auction respond to the problem of the "winner's curse"?
a. They bid more aggressively to win the auction and avoid the "curse". b. They exit the auction because winning can only be a bad sign of the object's worth. c. All bid less aggressively, so that the winner ends up not regretting having won. d. The winner regrets having won the auction.
Assume the economy is in recession and real GDP is below full employment. The marginal propensity to consume (MPC) is 0.50, and the government follows Keynesian economics by using expansionary fiscal policy to increase aggregate demand (total spending). If an increase of $1,000 billion aggregate demand can restore full employment, the government should:
a. increase spending by $250 billion. b. decrease spending by $500 billion. c. increase spending by $1,000 billion. d. increase spending by $500 billion.
When the production or consumption of a good involves an externality: a. resources are necessarily overallocated to the good
b. resources are necessarily underallocated to the good. c. someone not involved in buying or selling the good is affected. d. the market will efficiently allocate resources to its production.