Explain the essential difference between games in which moves are simultaneous and those in which moves are sequential
What will be an ideal response?
In a simultaneous-move game, each player has to decide what the other player's strategy will be and then act based on that strategy. Thus, one player cannot manipulate the other player by picking a particular strategy that might alter the other player's behavior. In contrast, in a sequential-move game, the player who gets to move first can pick a strategy that forces the other player's hand, so to speak. However, for the first mover's strategy to be successful, the first mover must be able to make a credible commitment to the strategy.
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Explain the potential downfalls of the Fed implementing an expansionary monetary policy or contractionary monetary policy at the wrong time
What will be an ideal response?
Consider a perfectly competitive firm that can raise its output by 2 units by hiring an additional unit of capital. If the cost of hiring this additional unit of capital is $4 and the market price of the good is $1, the firm will certainly hire this unit of capital. [Hint: MRP = MP X MR]
a. True b. False Indicate whether the statement is true or false
Suppose a bank has demand deposits of $100,000 and the legal reserve requirement is 20 percent. If the bank currently has $100,000 in reserves, it could expand the money supply by as much as
a. $100,000 b. $400,000 c. $0 d. $20,000 e. $80,000
Existing loopholes erode the progressivity of the U.S. tax system
a. True b. False Indicate whether the statement is true or false