The trade-off between unemployment rates and inflation originates in the
A. Upward-sloping AD curve.
B. Upward-sloping AS curve.
C. Downward-sloping AS curve.
D. Vertical AS curve.
Answer: B
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When prices drop in response to a decline in demand for an increasing cost industry
a. producer surplus will increase but rents may decrease. b. rent earned by elastically supplied inputs will decline by more than rent earned by inelastically supplied inputs. c. rent earned by elastically supplied inputs will decline by less than rent earned by inelastically supplied inputs. d. both producer surplus and rents will increase.
Back to the text: Amar is a safekeeper of people's gold (their money). He is a smart businessman who does not gamble and keeps 20 percent of the deposited gold on reserve to handle the transactions demands of depositors. Amar holds to a sound
a. excess reserve depletion rate b. liquidity of money c. volatility of money d. fractional reserve rule e. quantity theory of money
What does macroeconomic theory predict as the main economic effect of a reduction in the budget deficit?
A. Lower real interest rates B. A drop in the exchange rate C. An increase in net exports D. All of these responses are correct.
One problem with the utilitarian principle is that it ignores
A) increasing marginal costs. B) decreasing marginal benefits. C) the costs of making income transfers. D) poor people.