What criteria should be used in deciding the best definition of the money supply?
What will be an ideal response?
The answer depends on the purpose of the measurement. Economists are primarily interested in the relation between monetary aggregates and other economic variables, such as output, the price level, and interest rates. In this respect, a monetary aggregate is most useful when it is most closely related to these economic variables. Until the 1980s, M1 was the most widely accepted measure of the money supply. In the 1980s and 1990s, M2 has been most widely accepted.
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The Fed ________ intervene in the foreign exchange market by supplying dollars and the Fed ________ intervene in the foreign exchange market by demanding dollars
A) can; can B) cannot; can C) can; cannot D) cannot; cannot
Adverse selection is created by
A) incentives to change behavior after two parties have reached an agreement. B) risk. C) lump-sum taxes. D) private information.
Distinguish between investment goods and consumption goods. If you buy a car, is it investment or consumption? What if IBM buys a car? Are inventories a consumption or investment good?
What will be an ideal response?
The slope of a curve measures:
A. the change in the vertical variable in response to the change in the horizontal variable. B. the length of the curve. C. only the change in the horizontal variable. D. only the change in the vertical variable.