In what context does the use of real exchange rates make the most sense?
a. For determining if one nation's real GDP has increased faster than another nation's real GDP.
b. For determining if one nation's nominal GDP has increased faster than another nation's nominal GDP.
c. For calculating whether to purchase foreign or domestic stocks and bonds.
d. For determining changes in a nation's relative international competitiveness.
e. For calculating the cost of buying foreign goods and services.
.D
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In which of the following examples is excess burden not present?
a. Harriet decides to give up her Saturday hours at her law office after income tax rates rise. b. Rudolf still smokes three packs a day even after the excise tax on cigarettes rose 10 cents a pack. c. Wilma reduced the automatic payroll deduction to her savings account after the tax on interest was imposed. d. Harper decided to take a vacation in Bermuda rather than invest in stocks after the tax rate on capital gains was increased.
In both price-taker and competitive price-searcher markets, when an increase in market demand disrupts a long-run equilibrium, it will lead to
a. higher short-run prices and long-run profits. b. higher short-run prices, short-run profits, and the entry of additional firms into the market. c. higher short-run prices and the exit of firms from the market due to economies of scale. d. no change in prices in the short run, but new firms will enter in the long run.