How is an exchange rate depreciation likely to affect imports and exports in the short run and over a longer period of time?
What will be an ideal response?
In the short run, the value of imports may increase, increasing the current account deficit. It may take many months before it causes exports to rise and imports to fall.
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According to the traditional Keynesian approach, a tax cut raises aggregate demand because
A) a tax cut always results in a balanced budget. B) taxes are part of the C + I + G + X line. C) taxpayers anticipate a tax increase in the future. D) disposable income available to consumers increases.
If the production possibilities frontier between two goods were a straight line, then the opportunity cost of one good in terms of another would be
A) constant. B) increasing. C) decreasing. D) zero. E) either constant, increasing, or decreasing but more information is needed to determine which.
Which of the following types of economic regulation is most likely to encourage firms to inflate their costs?
A) price cap regulation B) rate of return regulation C) cartel regulation D) earnings sharing and price cap regulation
Suppose all firms in the market have the same costs as illustrated above. Of the following, which is the most likely action for a manager of the firms to take?
A) Increase the price of their grain.
B) Shut down.
C) Advertise their product.
D) Attempt to keep other firms from entering the market.