Consider the following statement, "The Federal Reserve fights recessions by increasing the money supply so people will have more money to spend." What is wrong with the statement and how can it be corrected?
What will be an ideal response?
The Federal Reserve fights recessions by increasing the money supply to lower interest rates, which in turn increases spending. It is not that people will have more money to spend, but that interest rates will be lower, which stimulates spending.
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According to the circular flow model, product markets are where
A. businesses acquire their inputs from households. B. households earn their money incomes. C. businesses incur their consumption expenditures to households. D. businesses earn their revenues from households.
See Scenario 4.1. Holding Daniel's income and Pd constant at $240 and $3 respectively, what is Daniel's demand curve for cake?
A) Qc = 240 - Pc B) Qc = 240/Pc C) Qc = 120/Pc D) Qc = 240/(3 + Pc) E) none of the above
The Ford Taurus and Ford Escort product lines (both produced by Ford) use many of the same parts in their cars, and the cars are, apart from design, virtually identical to one another, except for price. This suggests
a. a balanced oligopoly b. cartel pricing c. Ford's production inefficiency d. game theory pricing e. price discrimination
Which of the following statements about exchange is false?
a. The expectation of gain motivates people to engage in trade. b. If a party to a potential exchange does not believe that it will lead to personal gain, he or she can chose not to engage in the trade. c. Voluntary exchange is generally mutually beneficial to the trading partners. d. If one trading partner gains, the other must lose.