If the cost of a typical basket of goods in the U.S. is $100 and in France it is 400 euros, and the nominal exchange rate is 2 euro per dollar, what is the real exchange rate?
A. 0.5.
B. 1.0.
C. 1.5.
D. 2.0.
A. 0.5.
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To achieve long-run equilibrium in an economy with a recessionary gap, without the use of stabilization policy, the inflation rate must:
A. not change. B. increase. C. decrease. D. either increase or decrease depending on the relative shifts of AD and AS.
An increase in the liquidity of corporate bonds will ________ the price of corporate bonds and ________ the yield of Treasury bonds, everything else held constant
A) increase; increase B) reduce; reduce C) increase; reduce D) reduce; increase
Both screening and signaling:
A. correct inefficiency in the market. B. allow more transactions to take place that are valuable to buyers and sellers. C. can increase surplus gained in a market. D. All of these statements are true.
Use the idea of interpersonal comparisons of utility to argue for a progressive income tax system where people in higher income brackets are charged higher tax rates on their extra income.
What will be an ideal response?