What policy tool of the Federal Reserve relies on bank borrowing to be effective?
A. Check collection
B. The reserve requirement
C. The discount rate
D. Open-market operations
Answer: C
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The economy pictured in the figure has a(n) ________ gap with a short-run equilibrium combination of inflation and output indicated by point ________. 
A. recessionary; A B. recessionary; C C. recessionary; B D. expansionary; A
Last year, the price of heating oil was $4 per gallon, and Jonetta purchased 100 gallons of heating oil. This year, the price of heating oil falls to $3 per gallon while Jonetta's income is unchanged. Jonetta decides to share her good fortune by giving her retired father a gift of $100. Consider an indifference curve-budget line diagram with heating oil on the horizontal axis and "all other goods" on the vertical axis.
(i) Does the price change make Jonetta's budget line flatter or steeper? Justify your choice. (ii) After Jonetta gives the $100 gift, will her new budget line lie above, lie below, or pass through her initial optimum? Justify your choice. (iii) Sketch an indifference curve-budget line diagram that illustrates this situation. This year, will Jonetta be better or worse off than she was last year?
An increase in interest rates might ________ saving because more can be earned in interest income
A) encourage B) discourage C) disallow D) invalidate
If the quantities of labor and capital in an economy each increase by the same x percent, which of the following will increase by x percent?
A) marginal product of capital B) economic profits C) share of capital income in national income D) rental price of capital E) none of the above