Due to Pigou’s “defective telescopic faculty,” a market economy is inefficient in allocating resources between the present and the future.
Answer the following statement true (T) or false (F)
True
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Based on the figure below. Starting from long-run equilibrium at point C, a tax increase that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at point ________ and eventually to a long-run equilibrium at point ________, if left to self-correcting tendencies.
A. D; C B. D; B C. A; B D. B; C
If a central bank does not want to allow the domestic currency to depreciate, it will ________ international reserves by purchasing its currency, thereby ________ the monetary base and increasing the risk of higher unemployment
A) lose; decreasing B) lose; increasing C) acquire; decreasing D) acquire; increasing
A country is said to have an absolute advantage in the production of a good when:
A. its opportunity cost of producing the good is lower than another country. B. it can produce the good using fewer resources than another country. C. it specializes in the production of the good. D. it has a favorable exchange rate compared to another country's currency.
The opportunity cost of capital is
A. a part of economic profits. B. the normal rate of return. C. an explicit cost. D. usually unknown and must be estimated by looking at the price of capital goods.