Refer to the information provided in Figure 2.4 below to answer the question(s) that follow.
Figure 2.4According to Figure 2.4, as the economy moves from Point A to Point E, the opportunity cost of motorcycles, measured in terms of hybrid cars
A. remains constant.
B. decreases.
C. initially increases, then decreases.
D. increases.
Answer: D
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The self-correcting property of the economy means that output gaps are eventually eliminated by:
A. increasing or decreasing potential output. B. government policy. C. decreasing inflation only. D. increasing or decreasing inflation.
If the consumer price index were 233.8 last year, 261.3 today, a level of _____ next year would represent disinflation.
A. 261.3 B. 661.3 C. 283.1 D. 260.0
Which of the following is a deficit item in the U.S. current account?
A. A Saudi Arabian prince builds six new homes in California. B. Toyota builds a new plant in California. C. Sony buys a new film studio in Florida. D. Many U.S. residents who previously had not traveled abroad decide to make Mexico a tourist destination.
The reason that the expected inflation rate matters in determining the impact on borrowers or lenders is that
A. higher interest rates mean higher payments. B. interest rates depend on actual inflation, rather than expected inflation. C. lower interest rates mean lower payments. D. interest rates depend on expected inflation, rather than actual inflation.