Explain why having different marginal rates of substitution is necessary for trade to occur
What will be an ideal response?
The marginal rate of substitution is the rate at which a person is willing to trade one good for another. If these rates are not equal for all people, trade can occur. With different marginal rates of substitution at least one person gains by trading. When the marginal rates of substitution are the same for everyone, everyone is willing to trade goods at the same rate, so no one can gain by trading.
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A change in ________ creates a movement along the aggregate demand curve, while a change in ________ shifts the aggregate demand curve
A) expected profits; tax rates B) the price level; government expenditures C) foreign income; the foreign exchange rate D) real wealth; human capital
The above table shows some cost data for Tracey's Tents. What is the marginal cost of the 3rd tent?
A) $25 B) $20 C) $70 D) $120
Explain the theory of optimum currency areas
What will be an ideal response?
When the marginal propensity to save declines, the
A) multiplier becomes larger and the IS curve becomes flatter. B) marginal propensity to consume increases and there is no effect on the IS curve. C) multiplier becomes larger and the IS curve becomes steeper. D) multiplier declines and the IS curve becomes steeper.