Develop a simple model of inflation by identifying at least two exogenous variables and describing, briefly, how the value of these exogenous variables will impact the rate of increase in the overall level of prices in the economy
What will be an ideal response?
Answers will vary. The most appropriate exogenous variables to identify are the (growth rate of) the quantity of money and the (growth rate of) output. The former is positively related to inflation; the latter is negatively related.
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Answer the following statements true (T) or false (F)
1. Demand is a list of needs or wants, regardless of purchasing power. 2. There is a difference between demand and quantity demanded. 3. A typical demand schedule shows higher sales at lower prices. 4. The quantity of goods demanded is a function of price alone. 5. An increase in demand causes price to rise and quantity sold to fall.
If the value of exports equals $6.5 billion and the value of imports equals $8.0 billion in a year, then:
a. together imports and exports add $1.5 billion to the gross domestic product (GDP). b. together exports and imports add $6.5 billion to the gross domestic product (GDP). c. together exports and imports reduce the gross domestic product (GDP) by 1.5 billion. d. together exports and imports reduce the gross domestic product (GDP) by 1.5 billion. e. together exports and imports add nothing to the gross domestic product (GDP).
If we observe both an increase in the price of flour and in the number of units sold, this could be explained by: a. an increase in the demand for flour. b. a decrease in the demand for flour. c. a decrease in the supply of flour
d. an increase in the supply of flour.
The countries that dominated world manufacturing in the 1700s were overtaken by 1900 and are now considered struggling nations. Economic structuralists say this happened because Europe developed its economy by
a. establishing capital markets for technologies and industries. b. creating political systems that encouraged innovation and investment. c. conquering and impoverishing the rest of the world. d. letting commerce flourish rather than controlling it.