In the aggregate expenditures model, if aggregate expenditures (AE) equal $6 trillion and GDP equals $7 trillion, then:
A. inventory depletion equals ?$1 trillion.
B. inventory accumulation equals $1 trillion.
C. investment equals $1 trillion.
D. investment equals ?$1 trillion.
Answer: B
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If a 3 percent increase in the price of tennis shoes leads to a 7 percent increase in the number of tennis shoes supplied
A) the elasticity of supply equals 0.43. B) the elasticity of supply equals 2.33. C) income elasticity equals 2.33. D) supply is inelastic.
Suppose that Country A has an absolute advantage over country B in the production of both wheat and cloth. The opportunity cost of 1 unit of wheat is 2 units of cloth in Country A and 3 units of cloth in Country B. If each country specializes in producing the good in which it is relatively more efficient and then trades for the other good, it follows that
a. all the resulting gains in consumption will go to Country A. b. all the resulting gains in consumption will go to Country B. c. each country will experience half the resulting gains in consumption. d. the allocation of the resulting consumption gains will be determined by bargaining between the two countries.
Appendix: Research suggests that an auction for a private value item will yield the HIGHEST payout if:
a. we use a Dutch auction b. we use an English auction c. we use only cash, and not allow credit cards d. use a fixed price
Which of the following would cause the real exchange rate of the U.S. dollar to depreciate?
a. the U.S. government budget deficit decreases b. capital flight from foreign countries c. the U.S. imposes import quotas d. None of the above is correct.