Most economists believe that price indices
A) understate inflation and understate growth in real GDP.
B) understate inflation and understate growth in nominal GDP.
C) overstate inflation and understate growth in real GDP.
D) overstate inflation and understate growth in nominal GDP.
C
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An effect of international trade is
A) the increase in the average price of goods as the cost of transportation has to be included. B) the transmission of ideas around the world. C) that only countries that have absolute advantage in producing a good can participate. D) that the United States has a trade surplus.
After a country goes from disallowing trade in coffee with other countries to allowing trade in coffee with other countries,
a. the domestic price of coffee will be greater than the world price of coffee. b. the domestic price of coffee will be lower than the world price of coffee. c. the domestic price of coffee will equal the world price of coffee. d. The world price of coffee does not matter; the domestic price of coffee prevails.