In equilibrium, which of the following statements regarding the relative price of a tomato versus a book is CORRECT?
I. It is the opportunity cost of a tomato.
II. It is how much the production of books must fall in order to produce another tomato.
a. I
b. II
c. Neither is correct.
d. Both are correct.
Answer: b. II
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With respect to their impact on aggregate demand for the U.S. economy, which of the following represents the correct ordering of the wealth effect, interest-rate effect, and exchange-rate effect from most important to least important?
a. wealth effect, exchange-rate effect, interest-rate effect b. exchange-rate effect, interest-rate effect, wealth effect c. interest-rate effect, wealth effect, exchange-rate effect d. interest-rate effect, exchange-rate effect, wealth effect