A permanent reduction in planned real investment spending leads to
A. a proportional decrease in real GDP.
B. a more than proportional decrease in real GDP.
C. a more than proportional increase in real GDP.
D. a less than proportional decrease in real GDP.
Answer: B
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The theory that nominal exchange rates are determined so that the law of one price holds is called:
A. the law of supply and demand. B. the equilibrium principle. C. purchasing power parity. D. the fixed-exchange-rate rule.
Perfect competition exists in a market if
A) there are many firms producing an identical product. B) there are many firms producing a similar product, each of which may have unique features. C) the firm is protected by a barrier to entry. D) the firm is always at the break-even point where it is earning only a normal profit.
The unemployment rate is a good measure of the social welfare or social distress because
A) it includes discouraged workers. B) it distinguishes between part-time and full-time job seekers. C) it measures the "importance" of a job to each worker. D) None of the above.
Why is a sunk cost not part of the opportunity cost of a decision?
A. Because the expense would too often outweigh the benefits. B. Because the chances of recouping it are infinitesimally small. C. Because the money is gone, regardless of the decision made. D. Sunk costs are a part of the opportunity cost of a decision.