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True Or False - 21. Purchasing power parity tends not to hold exactly because of frictions such as transportation costs, and because not all goods...

True Or False -

21. Purchasing power parity tends not to hold exactly because of frictions such as transportation costs, and because not all goods are tradable

22. If the demand curve for a firm's output is inelastic, the firm can increase its revenue by raising its price

23. If a 20% increase decrease in price leads to a 40% increase in the quantity supplied then the supply curve is inelastic

24. The opportunity cost of acquiring something is what you have to give up to get it

25. Each seller of a product is willing to sell as long as the price he's or she receives is greater than or equal to the opportunity cost of producing that product

26. A movement along a demand curve is called a change in demand while a shift of the demand curve is called change in quantity demanded

27. An economy's production function can have both constant returns to scale (CRTS) and diminishing marginal product of capital (as more and more units of capital are employed, each successive unit of capital are employed and less additional output, other things held constant)

28. Two shortcomings of GDP per capita as a measure of a country's well being are that this measure only market transactions and doesn't consider how output is distributed

29. By owning a number of different companies stocks, you can reduce market risk but not eliminate it

30. To a macroeconomist saving and investing are the same activities

31. The real interest rate will rise if the demand for loanable funds decreases (for example investors become concerned about the country's future growth prospects)

32. An example of a moral hazard is when people or organizations behavior changes when they have insurance

33. The business cycle is regular and predictable

34. The fed increase the money supply (M) by selling assets

35. Tax incidence as defined by economists depends on whether the tax is collected by producers or consumers

36. The Phillips Curve which relates unemployment and inflation is negatively sloped in the short run but perfectly inelastic in the long run

37. In the books long run model, imposing tariffs or other trade restrictions will improve a countries trade balance in the long run, other things being equal

38. The quantity theory holds that in the long run MV=PY given that V is relatively constant and that long run output is determined by technology and the supplies of inputs, a 10% increase in M should increase P by 10%. Recent experience clearly shows that it does not necessarily hold in the short run when the economy is weak (output is less than the full employment level of output)

39. "Rational expectations" is the theory that people use all available information, including information about government policies in making their decisions

40. The units of the real exchange rate between the US and the UK are Pounds/Dollars (or from the UK's perspective Dollars/Pounds)

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