According to the U.S. Secret Service, approximately $2.6 billion of U.S. paper currency in circulation is counterfeit. As long as counterfeit U.S. currency remains undetected and in circulation, an increase in the U.S. inflation rate would essentially:
A. decrease the real value of the counterfeit currency.
B. increase the real value of the counterfeit currency.
C. decrease the nominal value of the counterfeit currency.
D. increase the nominal value of the counterfeit currency.
Answer: A
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An inferior good
a. has a negative income elasticity. b. is one where the demand curve shifts to the left when income goes up. c. exists only in theory. d. is a low-quality good. e. Both a and b are true.
For an individual who consumes only two goods, X and Y, the opportunity cost of consuming one unit of X in terms of how much Y must be given up is reflected in
a. the individual's marginal rate of substitution. b. the slope of the individual's budget constraint. c. the slope of the individual's indifference curve. d. None of the above.
Refer to the diagram for a pure monopolist. If a regulatory commission sets the price to achieve the socially optimal allocation of resources, it will have to:
A. tax the monopolist P 3 P 1 per unit to prevent the monopolist from realizing an economic
profit.
B. subsidize the monopolist or the monopolist will go bankrupt in the long run.
C. subsidize the monopolist P 1 P 4 per unit to allow the monopolist to break even.
D. tax the monopolist P 1 P 2 per unit to prevent the monopolist from realizing an economic
profit.
A monopolistically competitive industry has many firms that sell differentiated products.
Answer the following statement true (T) or false (F)