Describe the channels through which open market purchases by the Fed affects output in an open economy
What will be an ideal response?
Open market purchases lead to an increase in money supply. As a result, interest rates decrease, which not only leads to increased investment but also depreciates the exchange rate and raises net exports. The higher levels of net exports, in addition to the higher levels of investment, result in higher output levels.
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Refer to Table 2-9. What is Thailand's opportunity cost of producing one pound of rice?
A) 60 wristwatches B) 20 wristwatches C) 5 wristwatches D) 0.05 units of a wristwatch
Songwriters and composers press music companies to lower the price for music downloads because
a. demand for on-line music is inelastic b. profits are maximized where price elasticity of demand is -1.0 c. songwriter royalties are a percentage of sales revenue d. profits and total revenue are maximized at different quantities e. profits are maximized at the same prices as sales revenue
Why does the aggregate demand (AD) curve slope downward? What could cause the AD curve to shift to the right? What impact would a rightward shift of the AD curve have on the economy?
The reference base period is 2002. A consumer price index of 122 in 2009 means that
A) the average of the prices paid by urban consumers for a fixed market basket of consumer goods and services was 22 percent higher in 2009 than it was on average during 2002. B) prices of consumer goods have gone up by a factor of 12.2. C) if the price of a good was $100 in 2002, its price in 2009 is $122. D) the market basket of consumer goods that cost $122 in 2002 can be purchased for $100 in 2009. E) prices of consumer goods have more than doubled.