We observe that people buy less steak and more potatoes when the price of steak relative to potatoes increases. This indicates that steak and potatoes are
A) substitutes.
B) complements.
C) inferior goods.
D) unrelated goods.
Answer: A
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The real exchange rate, q, is defined as
A) the price of the foreign basket in terms of the domestic one. B) the price of the domestic basket in terms of the foreign one. C) the price of the foreign basket. D) the price of the domestic basket. E) the nominal exchange rate in terms of the domestic basket.
If technological breakthroughs in the internet cause large numbers of firms to consider investment projects they hadn't previously thought of, then
A) a shift in the supply of loanable funds will cause interest rates to rise. B) a shift in the supply of loanable funds will cause interest rates to fall. C) a shift in the demand for loanable funds will cause interest rates to rise. D) a shift in the demand for loanable funds will cause interest rates to fall. E) there will be an excess supply of loanable funds.