After nearly tripling the money supply after the housing market crash and subsequent financial crisis, inflation:
A. has slowly increased, due to restored consumer confidence in the market, increasing the marginal propensity to consume.
B. continued to fall, due to the lack of consumer confidence in the market, decreasing the marginal propensity to consume.
C. began to spiral out of control, due to the newfound solvency of banks, increasing lending and thus the money multiplier effect.
D. stayed relatively low, due to the lack of lending by banks, reducing the effectiveness of the money multiplier.
Answer: D
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A monopoly produces a product ________ and there ________ barriers to entry into the market
A) identical to its many competitors; are B) with no close substitutes; are C) identical to its many competitors; are no D) with no close substitutes; are no E) slightly different from those of its many competitors; are
For each of the following statements, define all of the underlined terms. Then, explain why the statement is true or false
a. If a consumer views two goods as perfect substitutes then their optimal choice will be a corner solution. b. The substitution effect from a price increase states that the consumer will always choose a smaller amount of that good to consume. However, the income effect states that consumption can move in either direction. c. Suppose Alf and Bo have convex indifference curves. Alf likes units of "X" more than units of "Y" but Bo likes units of "Y" much more than units of "X." Then, in the optimum, Alf's marginal rate of substitution will be different from Bo's even if they face the same prices. d. All Giffen goods are normal goods, but not all normal goods are Giffen goods. e. Economists assume that preferences are ordinal. This implies that given two utility functions and one is a monotonic transformation of the other, then they represent the same preferences over bundles of goods.
If we know that the demand curve for good x fails to reflect the total value to society of that good, then we know that
a. the market for good x is characterized by an externality, but we cannot determine whether the externality is positive or negative from this fact alone. b. the market for good x is characterized by a positive externality. c. the market for good x is characterized by a negative externality. d. the supply curve for good x fails to reflect the cost to society of producing that good.
All of the following are properties of typical indifference curves except
a. higher indifference curves are preferred to lower ones. b. indifference curves are downward sloping. c. indifference curves do not cross. d. indifference curves are bowed outward.