Assuming wages are indexed to inflation, if prices rose by 1.4 percent this month and your last month's wage was 1,000, your wage this month would be 1,014.
a. True
b. False
Indicate whether the statement is true or false
Question 2The existence of dual economies support the argument for _____.
a. developing domestic exports
b. reducing quotas on foreign goods
c. a more active monetary policy
d. the free movement of resources
e. imposing trade restrictions
Question 3How do taxes distort the incentives of buyers and sellers in a market?
Question 4Critics of targeting a zero inflation rate believe that achieving zero inflation is almost impossible and the costs are too high.
a. True
b. False
Indicate whether the statement is true or false
Question 5A dual economy is characterized by:
a. rapid productivity growth in both the agricultural sector and the manufacturing sector.
b. uneven development trends in two economic sectors.
c. drastic differences in regional work ethics.
d. the nonexistence of the government and foreign trade sectors.
e. a manufacturing sector that does not depend on natural resource supplies for production.
Question 6How does the size of the deadweight loss from a tax depend on the price elasticities of supply and demand?
Question 7Critics of inflation targeting will argue that central banks need flexibility.
a. True
b. False
Indicate whether the statement is true or false
Question 8Which of the following is not an argument in favor of inward-oriented strategies?
a. A newly developing economy needs protection from foreign competition.
b. Government restrictions are necessary to maximize the rate of economic growth.
c. Deteriorating prices of primary products in relation to manufactured goods expose developing countries to increasingly unfavorable terms of trade.
d. Developing countries should compete on the basis of comparative advantage.
e. Economic growth requires rapid industrialization and a shift away from primary products.
Question 9Ceteris paribus, explain why it is that when a lower ceiling price is imposed below equilibrium price, a greater deadweight loss results.
Question 10There is a tendency for inflation rates to fall in countries that use inflation targeting.
a. True
b. False
Indicate whether the statement is true or false
Question 11Assume that initially country A exchanges three barrels of oil for one ton of steel from country B. Later the arrangement changes to four barrels of oil for one ton of steel. This indicates that:
a. the terms of trade for country B have improved.
b. country A has a comparative advantage in the production of steel.
c. the relative price of steel in terms of oil has fallen.
d. the terms of trade for country A have improved.
e. country B has an absolute advantage in the production of oil.
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