The U.S. is able to maintain a large trade deficit because:
A. it is balanced by a large capital surplus.
B. when the business cycle is in a boom, it will be a trade surplus.
C. it is balanced by a large capital deficit.
D. None of these statements is true.
Answer: A
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The basic Keynesian argument for discretionary monetary policy is that
A) monetary policy is the principal cause of business cycles. B) monetary policy is much more effective than fiscal policy. C) aggregate demand is unstable and monetary policy can help to stabilize it. D) reducing unemployment is much more important than reducing inflation.
The Fed believes there are three advantages to using the personal consumption expenditures (PCE) price index instead of the CPI as a measure of inflation. These advantages include all of the following except
A) the PCE is a chain-type index as opposed to the market-basket approach used for the CPI, and the market-basket approach tends to overstate inflation. B) the PCE includes the prices of more goods and services than the CPI, so it is a broader measure of inflation. C) the PCE allows the Fed to better track historical trends in inflation than does the CPI because PCE values can be recalculated as new data becomes available. D) the PCE includes the value of imported products purchased by consumers , whereas the CPI does not, and imports make up a growing portion of consumer purchases in the United States.
For given input prices, isocosts farther from the origin are associated with:
A. initially lower, then higher costs. B. lower costs. C. higher costs. D. the same costs.
Suppose there is a simultaneous increase in demand and increase in supply. Given this information, we know with certainty that
A. the equilibrium price will increase. B. the equilibrium quantity will increase. C. the equilibrium price will increase, and the equilibrium quantity will increase. D. both the equilibrium price and the equilibrium quantity will increase.