Suppose that due to a drought, the price of agricultural goods rises. If land is specific to agriculture, capital is specific to manufacturing, and labor is mobile between sectors, which of the following is TRUE?
a. The percentage change in labor income is less than zero.
b. The percentage change in labor income is greater than the percentage change in the relative price of agricultural goods.
c. The percentage change in labor income is greater than the percentage change in the relative price of manufacturing goods.
d. The percentage change in labor income is less than the percentage change in the relative price of agricultural goods.
Ans: c. The percentage change in labor income is greater than the percentage change in the relative price of manufacturing goods.
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The brief success of the OPEC cartel in the 1970s can most plausibly be attributed to
A) the dependence of industrial economies on oil. B) the fact that OPEC was a cartel formed by national governments. C) the inelastic demand for oil. D) the misguided policies of the U.S. government. E) the widespread expectation of much higher prices in the future.
Briefly describe the combination of strategies used by government officials to protect investors and ensure the stability of the financial system.
What will be an ideal response?