An advantage of discretionary policy might be that ________
A) it has been shown to be more efficient than rules
B) it is more flexible than rules
C) it requires a binding plan in advance to deal with economic problems
D) all of the above
E) none of the above
B
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A natural monopoly that is regulated to set its price according to the marginal cost pricing rule will
A) incur an economic loss. B) maximize its profit. C) produce a quantity of output such that price is above average total cost. D) produce a quantity of output such that marginal cost is above average total cost.
Inflation expectations in the United States generally
A) fell from 1971 to 1976, rose from 1977 to 1985, then fell from 1985 to 1995, and have been stable since then. B) fell from 1971 to 1985, then rose from 1985 to 2000, and have been stable since then. C) rose from 1971 to 1987, then fell from 1987 to 2006. D) rose from 1971 to 1982, then fell from 1982 to 2000, and have been stable since then.
Suppose price decreases from $27.00 to $13.00. Using the mid-point formula, the percentage change in price is:
A. 0.35 = 35 percent. B. 0.7 = 70 percent. C. 0.7 = 70 percent. D. 14 percent.
The predictive accuracy of relative purchasing power parity improves if:
a. Both countries have highly mobile capital markets. b. Both countries have central bank controls in place so that exchange rates change in an orderly manner. c. Both countries under consideration have very high inflation rates. d. Both countries under consideration have high growth rates. e. Both countries are either developed or undeveloped (i.e., one is not developed and the other undeveloped).