Nominal GDP is calculated by using
A. prices set in a base year.
B. average prices in all major cities.
C. current prices.
D. prices charged by initial producers.
Answer: C
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Potatoes cost Janice $0.50 per pound, and she has $6.00 that she could possibly spend on potatoes or other items. Suppose she feels that the first pound of potatoes is worth $1.50, the second pound is worth $1.14, the third pound is worth $1.05, and all subsequent pounds are worth $0.30.
a. How many pounds of potatoes will she purchase?
b. What if she only had $3.00 to spend?
If the economy produces full employment output, an increase in government spending increases output but not the price level.
Answer the following statement true (T) or false (F)
In first degree price discrimination,
a. each consumer pays the same price. b. all consumer surplus is captured by the seller. c. the seller separates the buyers into different groups. d. the seller charges different prices per unit for different quantities.
Using the UIP equation to determine the spot exchange rate, assume that the expected spot rate (after one year) for euros (in terms of dollars) = $1.50, the current interest rate on euro deposits is 4.5%, and the current interest rate on dollar deposits is 5.5%. Which of the following current spot rates would satisfy the equation?
a. $1.65 b. $1.50 c. $1.485 d. $1.25