According to the quantity equation, if M increases by 3 per cent and V increases by 2 per cent, then:
A. real income increases by approximately 5 per cent.
B. the price level increases by approximately 5 per cent.
C. the nominal interest rate increases by approximately 5 per cent.
D. nominal income increases by approximately 5 per cent.
Ans: D. nominal income increases by approximately 5 per cent.
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Large countries can improve their welfare by levying a tariff only if it does not
A) encourage rent seeking elsewhere in the economy. B) discourage innovation. C) lead to retaliation by the nation's trading partners. D) All of the above. E) None of the above.
If a good is imported into (large) country H from country F, then the imposition of a tariff in country H
A) raises the price of the good in both countries (the "Law of One Price"). B) raises the price in country H and cannot affect its price in country F. C) lowers the price of the good in both countries. D) lowers the price of the good in H and could raise it in F. E) raises the price of the good in H and lowers it in F.