Suppose a McDonalds Big Mac costs $4.40 in the United States and 3.30 euros in the euro area and 5.72 Australian dollars in Australia. If exchange rates are .75 euros per dollar and 1.3 Australian dollars per dollar, where does purchasing-power parity hold?
a. both the euro area and Australia
b. the euro area but not Australia
c. Australia but not the euro area
d. neither the euro area nor Australia
a
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Starting from long-run equilibrium, a large decrease in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; lower; potential B. expansionary; higher; potential C. recessionary; lower; potential D. recessionary; lower; lower
Which of the following statements is FALSE?
A) Saving helps create economic growth. B) Economic freedom requires property rights. C) Free international trade helps create economic growth. D) Improvements in quality of education are important for economic growth. E) Faster population growth is the key to growth in real GDP per person.
A capital gain is defined as
A) the tax paid when one sells an asset. B) the positive difference between the sale price and the purchase price of an asset. C) the tax rate one pays when one moves into a higher tax bracket. D) an unanticipated increase in income.
Which of the following is a predictable side effect of increased government activity (for example, taxes and subsidies) designed to redistribute income among citizens?
a. improvement in the operational efficiency of government agencies b. rapid economic growth c. a reduction in the amount of lobbying d. an increase in rent-seeking activity