Suppose the economy is operating below potential output. If policy makers try to avoid a budget deficit by raising taxes or reducing government spending, these actions would:
A. increase inflation.
B. help pull an economy out of a depression.
C. make a recession worse.
D. negate the multiplier effect.
Answer: C
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The Solo Coal Mine is the only employer in the small town of Way out there. The market supply of coal miners is Qs = 0.02W - 200 and Qd = 500 - 0.02W, where W is the annual wage of a coal miner and Q is the number of coal miners. What is the wage required to hire the profit maximizing number of workers?
A. $25,000 B. $50,000 C. $20,000 D. $15,000
When one country can produce a given amount of a good using fewer inputs than any other country,
A. Specialization will definitely increase worldwide production possibilities. B. It has an absolute advantage in producing the good. C. It always has a comparative advantage in producing the good. D. Specialization will definitely increase worldwide consumption possibilities.
During the Great Depression in the United States between 1930 and 1933, banks' reserve/deposit ratio ________ and the amount of currency held by the public ________, while the money supply ________.
A. decreased; decreased; decreased B. increased; increased; decreased C. increased; increased; increased D. decreased; decreased; increased
In the fall of 2008, the Federal Reserve lowered its target for the federal funds rate to nearly 0 percent. What is the name of the group within the Federal Reserve that made this decision?
A. Federal Funds Operating Group B. Federal Advisory Committee C. Federal Deposit Insurance Corporation D. Federal Open Market Committee