If nations erect tariffs and quotas to restrict trade, what is likely to happen to predicted values of currencies drawn from the purchasing power parity theory?
a. They will be understated for tariffs and overstated for quotas.
b. They will be overstated for tariffs and understated for quotas.
c. They will be the correct values.
d. They will be incorrect.
d
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If two countries are economically identical except that there is significant air and water pollution in one, then the level of GDP:
A. will be the same in both countries. B. will be higher in the country with no pollution. C. will be higher in the country with pollution. D. will be greater than the level of economic well-being in each country.
The headline in the local paper today is "College tuition next fall rise by 6 percent." This statement is an example of
A) a normative statement. B) a positive statement. C) an invalid statement. D) ceteris paribus.
Starting from short-run equilibrium, the following occurs: labor productivity rises and individuals expect higher (future) incomes. What is the effect on the price level and Real GDP in the short run?
A) Real GDP falls and the price level necessarily rises. B) Real GDP rises and the effect on the price level cannot be determined. C) Real GDP rises and the price level necessarily falls. D) Real GDP falls and the effect on the price level cannot be determined. E) Real GDP rises and the price level necessarily rises.
Using the production function Real GDP = T (L, K), define the term production function and describe what each of the variables (T, L, and K) represents. When graphed with Real GDP on the vertical axis and labor on the horizontal axis, which variable(s) can shift the production function and which variable(s) can cause a movement along the production function?