If the Fed’s monetary policy causes a substantial increase in interest rates, what is the most likely impact on velocity?
A. Velocity will decrease.
B. Velocity will increase.
C. Velocity will remain constant.
D. Velocity is unrelated to interest rates.
Answer: B
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Adverse selection in insurance markets results in missing markets because people engage in riskier behavior once they are insured.
Answer the following statement true (T) or false (F)
Assume that instead of having a federal income tax, the federal taxes are levied as a consumption tax based upon a flat rate of 10 percent of all that you consume
How would this tax be different from an income tax? Would you expect this tax to be progressive, proportional, or regressive? What do you think would happen to the amount that people save under such a tax scheme? Explain your answers.
The contract curve in an Edgeworth Box diagram illustrates
A) the only efficient allocation of goods among individuals. B) all possible efficient allocations of goods among individuals. C) all equitable distributions of goods among individuals. D) the only equitable distribution of goods among individuals.
Assuming that opportunity costs are constant, which of the following is a correct statement? (See the above table.)
A) The United States has a comparative advantage in bicycle production. B) The United States has a comparative advantage in producing both goods. C) Mexico has a comparative advantage in producing bicycles. D) Mexico has a comparative advantage in producing both goods.