What may be the reasons that explain the observation that during periods of hyperinflation economic growth actually slows or even contracts?
What will be an ideal response?
Periods of hyperinflation or highly unstable prices almost always result from having too much money available. During these periods individuals are trying to cope with the crisis and not putting their efforts into producing goods and services efficiently. In fact from an earlier chapter we learned that one of the roles for money is to serve as a means of exchange, which facilitates exchange and minimizes the time individuals need to spend searching or creating the double coincidence of wants. When hyperinflation or unstable prices occur this causes people to revert to bartering or real goods and services, which means more time spent trading and less time spent producing. In addition, lending and borrowing presents far more risk during periods of unstable prices so less investment in the economy will occur which will also reduce economic growth.
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A monopolistic competitor exits the industry in the long run if ________
A) total revenue exceeds total cost B) total costs exceed total revenue C) marginal revenue exceeds marginal cost D) marginal revenue equals marginal cost
Refer to the table above. For trade to occur along the lines of comparative advantage, wages in A relative to wages in B (measured in the same currency)
A) must be at least twice but less than 3 times as great. B) must be less than three times as small. C) must be greater than $2 but less than $3. D) Need more information to answer.
Banks responded to disintermediation by
A) supporting the elimination of interest rate regulations, enabling them to better compete for funds. B) opposing the elimination of interest rate regulations, as this would increase their cost of funds. C) demanding that interest rate regulations be imposed on money market mutual funds. D) supporting the elimination of interest rate regulations, as this would reduce their cost of funds.
For a firm to be economically efficient from society's point of view, it should produce to the point at which
A) marginal cost equals marginal revenue. B) marginal cost equals average total cost. C) marginal cost equals price. D) average total cost equals price.