Question

TRUE OR FALSE

5. TRADE SURPLUS = EXPORTS > IMPORTS; MORE DOMESTIC JOBS; AND LOWER CONSUMER

PRICES; AND THIS IS GOOD FOR THE US ECONOMY.

6. GENERALLY THE HIGHER THE UNEMPLOYMENT RATE, THE HIGHER THE INFLATION RATE.

7. Ed > 1 Product is Inelastic.

8. STRUCTURAL UNEMPLOYMENT IS BETTER AND EASIER TO FIX COMPARED TO FRICTION

UNEMPLOYMENT.

9. ABSOLUTE ADVANTAGE IS WHEN A COMPETITOR CAN MAKE A PRODUCT WITH MORE

RESOURCES AND SLIGHTLY LOWER COSTS.

10. COMPARATIVE ADVANTAGE IS WHEN A COMPETITOR CAN MAKE A PRODUCT WITH

LOWER OPPORTUNITY COSTS; THEREFORE MAKES THE PRODUCT CHEAPER AND EASIER.

11. SUSTAINED COMPETITIVE ADVANTAGE IS LONG TERM, AND COMPETITIVE ADVANTAGE IS

SHORT TERM. BOTH ARE VERY IMPORTANT FOR COMPETITORS TO HAVE IN THE

MARKETPLACE .

12. AUTARKY, CLOSED SYSTEM, AND PROTECTIONISM ARE THE SAME. THEY MEAN NO

BUSINESS WITH OTHER COUNTRIES

13. ASSET INTEREST RATES ARE GENERALLY MUCH LOWER COMPARED TO DEBT INTEREST

RATES.

14. COMPARATIVE ADVANTAGE COMES FROM NATIONS’ CLIMATE, LABOR, TECHNOLOGY,

AND AVAILABIITY OF ENTPRENEURSHIP AND CAPITAL.

15. CAPITAL IN ECONOMICS MEANS SOME MONEY, EQUIPMENT,COMPUTERS, AND

BUILDINGS THAT HELP US PRODUCE OTHER PRODUCTS.

16. Ed OF INCOME= % CHANGE Qd/ % CHANGE I. THE HIGHER THE INCOME THE HIGHER Qd

FOR NORMAL PRODUCTS.

17. STOCKS GENERALLY ARE MORE RISKY THAN BONDS. BONDS ARE DEBT INVESTMENTS.

18. REAL INTEREST RATE < NOMINAL INTEREST RATE.

19. ACCOUNTING PROFIT= NET INCOME= REVENUES- EXPENSES – TAXES

20. ECONOMIC PROFIT= NET INCOME= REVENUES – EXPLICIT COSTS – IMPLICIT COSTS.

21. POSITIVE CASH FLOW = INFLOW < OUTFLOW.

22. FIRMS RAISE MONEY BY USE OF STOCKS, BONDS, AND DIVIDENDS.

23. OWNERS EQUITY= REVENUE – DIVIDENDS + EXPENSES – OWNERS PAID IN CAP.

24. RISKS ARE INDIRECTLY RELATED TO REWARDS.

25. MOODY’S, S & P, FITCH, AND SC JOHNSON ARE RATINGS AGENCIES FOR BOND

INVESTMENTS.

Answer 1

5.

True

Trade surplus is created when export is higher than imports. It increases the AD and creates more jobs in the economy.

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6.

False

When unemployment is higher, then inflation rate is lower. So, there is an inverse relation between unemployment and inflation.

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7.

False

When Ed is greater than 1, then the demand is elastic in nature.

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8.

False

It is structural unemployment that is difficult to be fixed. It is due to the reason that Structural unemployment takes place due to structural changes such as change in technology that cannot be fixed easily.

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9.

False

Absolute advantage is created when a product is produced with fewer resources.

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10.

True

producing goods with lower opportunity cost, is going to create comparative advantage.

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11.

True

Sustained competitive advantage is developed in the long ru, while competitive advantage is a short run phenomenon.

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12.

True

Autarky means no trade between one country and rest of the world.

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