Why is money as a medium of exchange important in an economy?
What will be an ideal response?
Money permits more specialization and reduces the transaction costs associated with means-of-payment uncertainty. Under barter, one might be uncertain as to what the other party might be willing to accept. With money, this uncertainty is greatly reduced.
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When asymmetric information problems drive high quality products from a market, we refer to this situation as:
A) adverse selection. B) moral hazard. C) a lemons problem. D) A and C are correct. E) B and C are correct.
The social discount rate used in cost-benefit analysis is equal to a weighted average of the Treasury Bill rate and the long-term government borrowing rate
a. true b. false
A fair distribution of income for the U.S. economy is
a. not an economic issue b. defined by the Department of Agriculture c. a positive economic question d. a normative economic question e. a state and local issue but not a national one
If the U.S. dollar depreciates against the yen below the targeted exchange rate, the U.S. Federal Reserve has to intervene in the foreign exchange market such that:
a. the U.S. demand for yen rises. b. the supply of U.S. dollars rises. c. U.S. exports to Japan fall. d. the U.S. dollar is devalued. e. the supply of U.S. dollars falls.