The Lucas critique focuses specifically on:
A. the role that economic policymaking has on people's economic behavior.
B. the relationship between Fed policy and the money supply.
C. the inability to measure economic performance accurately.
D. the moving away from fixed exchange rates to flexible exchange rates.
Answer: A
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Of the following methods that banks might use to reduce moral hazard problems, the one not legally permitted in the United States is the
A) requirement that firms keep compensating balances at the banks from which they obtain their loans. B) requirement that firms place on their board of directors an officer from the bank. C) inclusion of restrictive covenants in loan contracts. D) requirement that individuals provide detailed credit histories to bank loan officers.
Why would you expect the demand for diamond jewelry to fall faster than plastic, costume jewelry when all incomes fall?
What will be an ideal response?
Most countries:
A. protect cartels. B. have laws against firms making agreements about prices or quantities. C. protect oligopoly markets. D. force monopolists to become duopolists.
When a country experiences capital flight, which of the following rise?
a. its real interest rate and its real exchange rate b. its real interest rate but not its real exchange rate c. its real exchange rate but not its real interest rate d. neither its real interest rate nor its foreign exchange rate