If people expect relative PPP to hold
A) the difference between the interest rates offered by dollar and euro deposits will equal the difference between the inflation rates expected, in the United States and Europe, respectively, over the relevant horizon.
B) the difference between the interest rates offered by dollar and euro deposits will equal the difference between the inflation rates expected in Europe and the United States, respectively.
C) the difference between the interest rates offered by dollar and euro deposits will equal the difference between the inflation rates expected, over the relevant horizon, in the United States and Europe, respectively, in the short run.
D) the difference between the interest rates offered by dollar and euro deposits will be above the difference between the inflation rates expected, over the relevant horizon, in the United States and Europe, respectively.
E) the difference between the interest rates offered by dollar and euro deposits will be below the difference between the inflation rates expected, over the relevant horizon, in the United States and Europe, respectively.
A
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An economy has no imports or income taxes. The MPC is 0.75 and real GDP is $120 billion. Businesses increase investment by $4 billion. The new level of real GDP is
A) $140 billion. B) $128 billion. C) $136 billion. D) $124 billion. E) $132 billion.
Ad valorem tariffs are collected as
A) fixed amounts of money per unit traded. B) a percentage of the price of the product. C) a percentage of the quantity of imports. D) All of the above.
Road pricing will improve the allocation of resources to transportation
Indicate whether the statement is true or false
A subsidy is sometimes used by the government to correct the problems associated with
A) negative externalities. B) positive externalities. C) public goods. D) monopolies.