When prisoners use cigarettes or some other good as money, cigarettes become
a. commodity money, but do not function as a unit of account.
b. commodity money and function as a unit of account.
c. fiat money, but do not function as a unit of account.
d. fiat money and function as a unit of account.
b
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Which of the following statements best describes what occurs when monetary authorities sell government securities?
A. The size of commercial banks' excess reserves decreases, the money supply decreases, and the interest rates rise, thereby causing a decrease in investment spending and real GDP. B. The size of commercial banks' excess reserves decreases, the money supply decreases, and interest rates rise, thereby causing an increase in investment spending and real GDP. C. The size of commercial bank reserves increases, the money supply increases, and interest rates fall, thereby causing an increase in investment spending and real GDP. D. The size of commercial banks' excess reserves decreases, the money supply increases, and interest rates fall, thereby causing a decrease in investment spending and real GDP.
Economists who believe that policy errors are the source of economic instability argue that the crisis of 2008 was primarily the result of
a. housing regulations that undermined sound lending practices and Fed policies that generated the housing boom and bust. b. the stock market crash. c. the actions of speculators who drove up the world price of oil, the domestic price of gasoline, and other energy sources. d. persistently high interest rates during the decade leading up to the crisis.
Which of the following is most important if a country is going to grow rapidly and achieve a high level of per capita income?
a. an abundance of natural resources b. a warm moist climate c. a small population relative to the geographic size of the country d. institutions and policies that encourage people to engage in productive activities
With respect to real output, in the long run, money is:
What will be an ideal response?