Recall the Application about productivity in the nation of Latvia in the 1990s to answer the following question(s). According to this Application, workers in the EU were more productive than workers in Latvia in the 1990s, yet despite this, EU nations chose to buy timber from Latvia. If EU governments decide to buy timber only from the EU, then:
A. its citizens will be better off while their producers will be worse off.
B. its citizens and producers will be worse off.
C. its citizens and producers will be better off.
D. its citizens will be worse off and producers will be better off.
Answer: D
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Because many European nations have adopted the euro as their common currency, they are ________ able to conduct independent ________ policy.
A. no longer; fiscal B. increasingly; monetary C. increasingly; fiscal D. no longer; monetary
The model predicts that a temporary decrease in government purchases causes:
a. an increase in consumption. b. an increase in gross investment. c. a reduction in real GDP. d. all of the above.
A regulated firm may have an incentive to spend an inefficiently high amount on capital when:
a. it becomes deregulated. b. fair rate of return regulation is used. c. regulators set price equal to marginal cost. d. it is part of a monopolistically competitive industry. e. it is allowed to charge a monopoly price.
The assumption that labor markets clear makes it very easy for the classical model to explain expansions
a. True b. False