Suppose you have a collection of gold coins from the 19th century. Comment on their suitability to provide for you each of the three functions of money
What will be an ideal response?
The coins are an exceptional store of value. They would serve well as a medium of exchange, eagerly accepted by most people. They are a poor unit of account, since their value fluctuates a great deal relative to other goods. The face value of the coins is not a reliable indicator of their worth relative to other goods. This is because they are valued primarily as a store of value (and historical/artistic artifacts), rather than as a medium of exchange.
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In a small town the local hardware store can charge higher prices than one in a large city with many hardware stores because the local hardware store
A. is privately owned. B. has fewer items to sell so they need to sell items for higher prices. C. has more market power in the small town. D. is motivated by profit while the other hardware stores are not.
Using Figure 3 below, suppose that the economy was at Y2. This level of GDP would be considered:
A. inflationary.
B. recessionary.
C. a long run level of output.
D. unsustainable over time.
If the marginal propensity to consumer is 0.9, what is the value of the expenditure multiplier?
a. 1.0 b. 1.9 c. 10 d. 0.1 e. 0.9
If aggregate demand increases by the amount of the recessionary GDP gap and aggregate supply is upward-sloping,
A. The economy will move to full employment. B. An AD surplus will occur. C. An inflationary GDP gap will develop. D. A recessionary GDP gap will still exist.