Ben N. Jerry prefers to keep his $10,000 retirement savings buried in the backyard. After an increase in the price level, Ben reduces the amount of goods and services he wants to purchase. Ben's rationalization, that now his retirement savings won't buy as much, is consistent with which explanation of the aggregate demand curve's negative slope?
a. the interest rate effect
b. the open economy effect
c. the inflation effect
d. the wealth effect
d
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The "big tradeoff" refers to the point that governmental redistribution of income causes
A) less efficiency because it weakens incentives to work. B) less efficiency because it strengthens incentives to work. C) more efficiency because it weakens incentives to work. D) more efficiency because it strengthens incentives to work.
Briefly explain how a U.S. company that exports to Europe can hedge against exchange rate risk
What will be an ideal response?
Investments that are specific to a relationship (i.e. of lower value elsewhere) are considered risky and require:
a. an enforceable contract. b. an efficient spot market. c. high rates of return. d. verbal commitments.
Which of the following is an example of antitrust legislation?
a. a law that breaks up an oil monopoly b. a law that approves a subsidy for drug research c. a law that prevents price fixing in the CD industry d. a law that requires a construction firm to stop predatory pricing