The self-correcting tendency of the economy means that rising inflation eventually eliminates:
A. unemployment.
B. exogenous spending.
C. recessionary gaps.
D. expansionary gaps.
Answer: D
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The discount rate is the interest rate
A) paid on time deposits. B) paid on funds banks borrow from other banks. C) paid on funds that depository institutions borrow from the Federal Reserve. D) that banks charge their "best" customers.
Pigouvian subsidization:
A. involves the use of taxes or fees to remedy negative externalities. B. involves the use of subsidies to remedy negative externalities. C. is a legal principle requiring a party who takes an action that harms others to compensate the affected parties for some or all of their losses. D. requires that victims of an externality pay a tax to the producers of the externality.
When deciding whether to buy a second car, marginal analysis indicates that the purchaser should compare the:
a. benefits expected from two cars with the cost of both. b. additional benefits expected from a second car with the cost of the two cars. c. dollar cost of the two cars with the potential income that the cars will generate. d. additional benefits of the second car with the additional cost of the second car.
The key to a successful positive signal is that:
A. it is hidden information. B. it builds trust between the principal and the agent. C. it is costly to fake. D. All of these statements are true.