The Federal Reserve plays a larger role than Congress and the president in stabilizing the economy because
A) the Federal Reserve can more quickly change monetary policy than the president and the Congress can change fiscal policy.
B) the Federal Reserve can immediately recognize when real GDP is below or above potential GDP.
C) changes in interest rates have a considerably larger effect on the economy than changes in government purchases or taxes.
D) changes in interest rates have their full effect on the economy in a short period of time, whereas changes in government spending and taxes have their full effect over a long period of time.
Answer: A
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Unemployment occurs when someone:
A. wants to work but cannot find a job. B. is not working full-time. C. should be working but chooses not to. D. has useful skills that are not being used.
Suppose that X and Y are substitute goods. If the price of good X increases, we can expect
a. the demand for good X to shift to the left b. an upward movement along the demand curve for good Y c. the demand curve for good Y to shift to the right d. a downward movement along the demand curve for good Y e. the demand curve for good Y to shift to the left
A key to gaining cooperative behavior in a repeated game is:
A. there must be a definitive end to the game. B. that the game must be repeated indefinitely. C. the players must commit to always acting in their own self-interest. D. at least one player must have a dominant strategy.
Refer to Exhibit 2.7, which shows the production possibilities frontier for capital goods and consumer goods. Identify the correct statement.
a. If the economy is initially at point b, an increase in capital stock will lead to a movement to point c. b. If the economy is initially at point c, an increase in capital stock will lead to a movement to point b. c. Economic growth will allow the economy to produce at a point that lies on a higher production possibilities frontier. d. Economic growth will allow the economy to produce at a point that lies on a lower production possibilities frontier. e. If the economy is initially at point a, an improvement in the rules of the game will lead to a movement to point c.