Using the U.S. as an example, explain why rising budget deficits on the part of a federal government creates a potential point of conflict between fiscal and monetary policymakers.
What will be an ideal response?
Members of Congress and the President have a short-term view of policy. Their time horizon is usually the next election. As a result when it comes to budget matters they would prefer not to raise taxes and at the same time, any member of Congress will not want to reduce spending in his or her district or state, even if this deficit spending may raise interest rates and/or the inflation rate. As a result, one could argue that Congress would be prone to run budget deficits preferring to push the problem of paying for government programs well into the future. Monetary policymakers, on the other hand, have a long time horizon and worry about inflation. On the matter of budget finance it is often the situation that Congress, the President and the Chairman of the Fed can have opposing views on its significance and how it should be dealt with.
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The above figure shows the payoff to two gasoline stations, A and B, deciding to operate in an isolated town. If firm A chooses its strategy first, then
A) firm A will not enter. B) firm B's entry is blockaded. C) both firms will enter. D) firm A will enter and firm B will not.
If a firm decreases output when MR > MC, then:
a. profit will equal zero. b. profit will increase. c. profit will decrease. d. profit will remain the same. e. the firm is minimizing losses.
Suppose the market consists of 3 individuals: Citizen A, Citizen B and Citizen C. 
If the good shown on the graphs is a public good, then the marginal benefit of the 30th unit is:
A. $4 B. $30 C. $2 D. $9
If the Japanese yen appreciates against the U.S. dollar:
A. Americans should find Japanese goods are now less expensive. B. U.S. goods should have an easier time competing against Japanese goods in both countries. C. Japanese residents would find Japanese goods are relatively less expensive than American goods. D. Japanese goods should have an easier time competing against U.S. goods in both countries.