The marginal rate of substitution of an isoquant curve is the rate at which:
A. inputs must be substituted for one another to keep costs constant.
B. the marginal productivity of a factor declines.
C. inputs must be substituted for one another to keep output constant.
D. inputs are substituted for output.
Answer: C
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The balance of payments has become a central issue for the United States because
A) when the balance of payments is not balanced, society is unbalanced. B) the U.S. economy cannot grow when the balance of payments is in deficit. C) the U.S. has run huge trade deficits in every year since 1982. D) the U.S. never experienced a surplus in its balance of payments. E) the U.S. once ran a large trade surplus of about $40 billion.
The expectation of future revaluation causes a balance of payments crisis marked by
A) a sharp rise in reserves and a fall in the home interest rate below the world interest rate. B) a sharp fall in reserves and an even bigger fall in the home interest rate below the world interest rate. C) a sharp fall in reserves and a rise in the home interest rate above the world interest rate. D) a sharp rise in reserves and an even greater rise in the home interest rate above the world interest. E) a sharp fall in reserves and an unchanged home interest rate.