If the graph shown represents Donna's budget constraint, and the price of earrings were to decrease, the slope of Donna's budget constraint would become:
A. flatter, reflecting the fact that hairbands are now relatively more expensive.
B. steeper, reflecting the fact that hairbands are now relatively less expensive.
C. flatter, reflecting the fact that earrings are now relatively more expensive.
D. steeper, reflecting the fact that earrings are now relatively less expensive.
Answer: D
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If the nominal wage is $30 in 2011 and the CPI is 202 in 2011, then the real wage in 1982-1984 dollars
A) is $14.85. B) is $30. C) is $1.48. D) is $29.00. E) cannot be calculated without the past year wage rate.
In order for the condition E$/HK$ = PUS/PHK to hold, what assumptions does the principle of purchasing power parity make?
A) Only that there are no transportation costs and restrictions on trade. B) Only that the markets are perfectly competitive, i.e., P = MC. C) The factors of production are identical between countries. D) No arbitrage exists. E) HK and the US are perfectly competitive and there are no transportation costs or restrictions on trade.
Suppose the current account of a country is initially in balance. A new transaction occurs so that the current account is now in surplus. Official reserve balance is maintained before and after the transaction occurs. From this, we know that
A) the balance of trade is now in surplus. B) the balance of goods and services is now in surplus. C) the capital account is now in deficit. D) the government must make official reserve transactions.
In a two-asset economy with money and T-bills, the quantity of money that people will want to hold, other things being equal, can be expected to:
a. decrease as real GDP increases. b. increase as the interest rate decreases. c. increase as the interest rate increases. d. all of these.