Self-fulfilling expectations challenge the idea of a well-functioning market, particularly in the exchange rate market, because the exchange rate:
A. is determined by rumors.
B. may be driven by supply and demand forces.
C. may not be driven by supply and demand forces.
D. is determined by traders and speculators.
Answer: C
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Workers and firms both expect that prices will be 3% higher next year than they are this year. As a result
A) workers will be willing to take lower wages next year. B) the purchasing power of wages will rise if wages increase by 3%. C) the short-run aggregate supply curve will shift to the left as wages increase. D) aggregate demand will increase by 3%.
In deriving the aggregate demand curve from the aggregate expenditures model, we note that:
A. the real-balances effect is irrelevant to both models. B. a change in the price level will have no impact on the aggregate expenditures schedule. C. an increase (decrease) in the price level shifts the aggregate expenditures schedule upward (downward). D. an increase (decrease) in the price level shifts the aggregate expenditures schedule downward (upward).
The government imposes a luxury tax on automobiles that cost more than $40,000. As a result, fewer individuals purchase cars that cost more than $40,000. This is an example of
A. tax shifting. B. tax evasion. C. tax equity. D. tax incidence.
India is on the World Bank's list of ________ countries yet its capital city is one of the top ten centers of commerce in the world.
A. low-income B. high-income C. upper middle-income D. lower middle-income