Which of the following would most likely occur if the federal government increased its spending and enlarged the size of the budget deficit during a period of full employment?
A. The rate of inflation would decline.
B. The rate of inflation would rise.
C. A recession would develop.
D. Interest rates would fall.
Answer: B
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Your classmates from the University of Chicago are planning to go to Miami for spring break, and you are undecided about whether you should go with them. The round-trip airfares are $600, but you have a frequent-flyer coupon worth $500 that you could use to pay part of the airfare. All other costs for the vacation are exactly $900. The most you would be willing to pay for the trip is $1400. Your only alternative use for your frequent-flyer coupon is for your trip to Atlanta two weeks after the break to attend your sister's graduation, which your parents are forcing you to attend. The Chicago-Atlanta round-trip airfares are $450.What is the opportunity cost of using the coupon for the Miami trip?
A. $500 B. $450 C. $100 D. $550
The ability of a central bank to set monetary policy goals is
A) political independence. B) goal independence. C) policy independence. D) instrument independence.
"Debt repudiation" occurs when
A) a government announces it will no longer run nominal deficits. B) a government announces it will no longer run real deficits. C) a government announces it will no longer honor its debt obligations. D) a central bank will no longer monetize the debt.
In 18th century Europe, governments gave guilds legal authority to limit production of goods. How did this authority either obstruct or improve the market mechanism?
A) It improved the market mechanism by making it more efficient because the guilds were able to quickly identify and rectify any market shortages and surpluses. B) It improved the market mechanism because the government's actions provided the correct set of signals to the market so that producers can adjust their output to better meet the needs of consumers. C) It obstructed the market mechanism because the guild's actions prevented the forces of demand and supply from coordinating the self-interested decisions of producers and consumers. D) It obstructed the market mechanism because with one more party having to coordinate activities (the guilds) there were delays in getting the products to consumers.