Starting from long-run equilibrium, a large tax increase will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. recessionary; lower; potential
B. expansionary; lower; potential
C. expansionary; higher; potential
D. recessionary; lower; lower
Answer: A
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A foreign exchange intervention with an offsetting open market operation that leaves the monetary base unchanged is called
A) an unsterilized foreign exchange intervention. B) a sterilized foreign exchange intervention. C) an exchange rate feedback rule. D) a money neutral foreign exchange intervention.
At Christmastime, individuals choose to hold more cash and fewer deposits to facilitate their Christmas shopping. This condition will
A) increase the money supply, for people will be spending more money. B) have no effect on the money supply because people are just exchanging one form of money (deposits) for another form (cash). C) reduce the money supply because there will be a drain of reserves out of the banks. D) reduce the money supply, for all that cash is spent on Christmas presents.
Refer to the table below. Busy Betty sells her cakes for $20 each and her constant marginal cost to produce each cake is $12, which is equal to her (constant) average total cost. If she does not sell a cake the day she makes it, she sells it as day-old cake for $10. What is her expected marginal cost of holding the 20th cake in inventory?
The above table shows the probability distribution of cake sales at Busy Betty's Bakery.
A) $0.40
B) $10.00
C) $0.20
D) $2.00
If the official unemployment rate increases in March from its February level because of sluggish sales in the auto industry, we can conclude that ____ unemployment is responsible for the increase
a. seasonal b. cyclical c. structural d. frictional e. any one of the causes of