The decisions of firms and households are guided by prices and self-interest in a
a. command economy.
b. centrally-planned economy.
c. market economy.
d. All of the above are correct.
c
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The demand for a good is elastic if
A) an increase in its price results in an increase in total revenue. B) a decrease in its price results in a decrease in total revenue. C) an increase in its price results in a decrease in total revenue. D) the good is a necessity.
In practice, one of the principal problems with aggregate demand management is that
A) changes in aggregate demand do not affect output. B) changes in aggregate demand cannot reduce unemployment. C) changes in aggregate demand are highly inflationary. D) stabilization policies could increase aggregate demand too much and at the wrong times.
The inflation that occurred during the Civil War (1861–1865)
(a) was a means of expropriating resources to fight the war. (b) was a form of taxation to provide resources to fight the war. (c) represented a decrease in the purchasing power of money. (d) was true for all of the above.
Mortgages with variable interest rates: a. increase the risk of expected inflation to creditors. b. increase economic efficiency. c. are offered at interest rates that can be adjusted to changes in inflation over time. d. make borrowers worse off when inflation increases
e. shift the risk of unexpected inflation from the borrower to the lender.