The long-run trends of relative prices of primary products suggest that the countries that are dependent on the export of primary products are most likely to
A. slowly catch up with the average per capita income in the industrialized countries.
B. experience an increase in their growth rates.
C. be able to import more from abroad.
D. experience deterioration in their terms of trade.
Answer: D
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The fact the consumers substitute one good for another when prices change is
A) taken into account by the fixed market basket used in calculating the CPI. B) not taken into account by the fixed market basket used in calculating the CPI. C) not important to economists. D) a reason why the CPI is used to calculate inflation rates. E) a reason why the CPI understates the actual change in the cost of living.
The amount of loans that a bank can create is limited by
A) a law enacted by Congress. B) the bank's excess reserves. C) a directive from the Federal Reserve System, which takes into account the bank's financial stability. D) the real interest rate. E) the bank's government securities.