In the graph shown, an upward shift in the WAS curve:
A. lowers the trade deficit, because domestic producers are more competitive.
B. raises domestic consumption, because domestic producers will produce more.
C. lowers domestic production, because domestic consumption has fallen.
D. raises globalized potential output, because U.S. producers are less competitive.
Answer: A
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In the short run, a perfectly competitive firm earning negative economic profit
A) is on the downward-sloping portion of its AVC. B) is at the minimum of its AVC. C) is on the upward-sloping portion of its AVC. D) is not operating on its AVC. E) can be at any point on its AVC.
Which of the following does purchasing-power parity imply?
a. The purchasing power of the dollar is the same in the U.S. as in foreign countries. b. The price of domestic goods relative to foreign goods cannot change. c. The nominal exchange rate is the ratio of U.S. prices to foreign prices. d. All of the above are correct.