If the amount of money in circulation is $400 billion and the nominal GDP is $800 billion, the velocity of money is
a. 0.5.
b. 2.
c. 4.
d. 8.
B
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When the price of a good falls, consumers buy more of the good because it is cheaper relative to competing goods. This statement describes the
a. consumer equilibrium effect. b. price effect. c. income effect. d. substitution effect.
Kornai argued that transition from socialism to capitalism requires the creation of democracy
a. True b. False
Income tax collections:
A. fall during periods of prosperity, thus increase federal budget deficits. B. rise during periods of prosperity, thus reduce federal budget deficits. C. fall during recessions, thus increase the problem of unemployment. D. rise during recessions, thus increase the problem of unemployment.
Suppose Country A, a labor-abundant country, produces only wheat and cloth. The following equations illustrate the prices and costs of wheat and cloth in the country. The numbers indicate the amounts of labor and land needed to produce a unit of wheat and cloth. 'W' is the wage rate and 'r' is the rental rate of land.Price of wheat = 1w + 2rPrice of cloth = 2w + 1rSuppose Country A engages in free trade and the price of cloth increases to $4 per unit. However, the price of wheat remains unchanged. Under such a situation, the Stolper-Samuelson theorem will predict that
A. the purchasing power of both the landowners and the laborers will increase. B. the purchasing power of the laborers will increase but that of the landowners will decline. C. the real income of both the landowners and the laborers will decline. D. the real income of the landowners will increase but that of the laborers will remain unchanged.