Which of the following statements is true of the quantity theory of money?
A) The theory explains the relationship between growth in real GDP and changes in nominal interest rates.
B) The theory states that inflation will always be positive.
C) Predictions of the theory can be verified with data.
D) The theory is applicable only in the short run.
C
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If, for a given disposable income level, the disposable income line lies below the consumption curve, saving:
a. equals consumption. b. equals disposable income. c. is less than zero. d. is equal to zero. e. is greater than zero.
Suppose an American worker can make 100 chairs or catch 900 fish per day. On the other hand, a Chilean worker, can make 40 chairs or catch 400 fish per day. The United States has an absolute advantage in the production of both fish and chairs. This means that the United States:
A. should produce only chairs and trade with Chile to get fish. B. should produce only fish and trade with Chile to get chairs. C. should take advantage of Chile by trading with them. D. can produce more fish and chairs than Chile given the same amount of workers.