As you move down the production possibility frontier, the absolute value of the marginal rate of transformation
A. increases.
B. initially decreases, then increases.
C. decreases.
D. initially increases, then decreases.
Answer: A
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If the Federal Reserve decreases the Federal funds rate, other short-term interest rates ________ and the exchange rate ________
A) fall; falls B) do not change; rises C) fall; does not change D) fall; rises E) do not change; falls
Suppose we observe that the demand for eggs increases when people buy more potatoes. We can conclude that eggs and potatoes are
A) inferior goods. B) normal goods. C) complements. D) substitutes.
People:
a. tend to specialize in those activities in which their opportunity costs are minimum b. tend to specialize in those activities in which their opportunity costs are maximum. c. never consider opportunity costs while deciding which activities to specialize in. d. consider only direct costs while deciding which activities to specialize in. e. do not behave in their own self-interest.
Assume that the central bank purchases government securities in the open market. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to the quantity of real loanable funds per time period and the nominal value of the domestic currency in the context of the Three-Sector-Model?
a. There is not enough information to determine what happens to these two macroeconomic variables. b. The GDP Price Index rises, and nominal value of the domestic currency rises. c. The GDP Price Index falls, and nominal value of the domestic currency rises. d. The GDP Price Index rises, and nominal value of the domestic currency remains the same. e. The GDP Price Index rises, and nominal value of the domestic currency falls.