The economy suffers an adverse supply shock. As a result, in the short run Real GDP will __________ and the price level will __________
A) rise; rise
B) fall; fall
C) fall; remain constant
D) fall; rise
E) rise; fall
D
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Most t-shirts bought by Americans are made in Asia. As a result of free trade, the production of t-shirts in America
A) has increased. B) has stayed the same. C) has decreased. D) has been taken over by the government. E) might change, but more information about what else the United States imports is needed to determine if U.S. production increased, decreased, or did not change.
All of the following are differences in capital flows today from the past, EXCEPT
A) the increasing variety of financial instruments. B) the larger number of companies listed on world stock exchanges. C) the need to protect from sudden changes in currency values. D) the problem of volatility in financial capital flows.