Imagine two cities, Hometown and Visitorsville, where the rich, middle, and poor income recipients in one city have annual incomes identical to their counterparts' incomes in the other city. In Hometown, the poorest families one year almost always end up as the richest families the next year and become middle-income families the year after that. In Visitorsville, however, the poor remain poor and
the rich remain rich. Which of the following is true about the two cities?
a. Annual data on the distribution of income will indicate that the degree of income inequality in the two cities is identical.
b. The degree of lifetime income inequality in the two cities is identical.
c. The income mobility of people in the two cities is identical.
d. The distribution of annual income is more unequal in Visitorsville.
A
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In an antitrust lawsuit, which of the following parties is entitled to receive treble damages?
a. The Antitrust Division of the Justice Department b. The Federal Trade Commission c. Private plaintiffs d. State attorney generals e. The Department of Labor
Which account of the balance of payments is most likely to be directly affected when the country decides to fix its exchange rate?
a. Current international transactions b. Net nonreserve-related international borrowing/lending c. Official reserve-related (central bank) transactions d. None.
Which of the following statements is not valid when supply is perfectly elastic?
a. The elasticity of supply approaches infinity. b. The supply curve is horizontal. c. Very small changes in price lead to very large changes in quantity supplied. d. The time period under consideration is more likely a short period rather than a long period.
If an economy is operating on its production possibilities frontier (PPF), are there any unemployed resources in the economy?
A) Yes, because if there weren't any unemployed resources the economy would be producing beyond its PPF. B) No, because if there were any unemployed resources the economy would be producing below its PPF. C) It depends on whether the economy's PPF is a concave (downward-sloping) curve or a straight line. D) Yes, because there are always some natural resources that are unemployed. E) The answer is "yes," but not for any of the reasons specified in answers a through d.