Suppose there is an early freeze in California that reduces the size of the lemon crop. What happens to consumer surplus in the market for lemons?
a. Consumer surplus increases.
b. Consumer surplus decreases.
c. Consumer surplus is not affected by this change in market forces.
d. We would have to know whether the demand for lemons is elastic or inelastic to make this determination.
b
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If the government of a country owes $3,500 billion to the International Monetary Fund and then borrows $300 billion more this year, it implies that the: a. national debt is $300 billion and fiscal deficit is $3.8 trillion. b. national debt is $3,800 billion and fiscal deficit is $300 billion. c. national debt is $4,100 billion
d. fiscal deficit is $3,800 billion. e. national debt and fiscal deficit both equal $3.8 trillion.
In a simplified banking system with a 20 percent required reserve ratio, a $1,000 open-market sale by the Fed would cause the money supply to:
a. increase by $200 b. decrease by $200. c. decrease by $5,000 d. increase by $5,000.
To be valid, an economic model must
a. include every activity that occurs in the real world b. include every economic activity that occurs in the real world c. be useful in explaining cause-and-effect relationships in the real world d. exclude any link to the real world e. not be based on an abstraction of the real world
If the Fed has announced that it plans on lowering the interest rate it will
A. engage in contractionary open market operations, thereby decreasing the money supply. B. engage in expansionary open market operations, thereby decreasing the money supply. C. engage in contractionary open market operations, thereby increasing the money supply. D. engage in expansionary open market operations, thereby increasing the money supply.