In December 2008, the Federal Reserve announced that it would take extraordinary measures to address the financial crisis in the economy. These measures include all of the followingexcept
A) buying mortgage-backed securities.
B) buying long-term Treasury bills.
C) creating other new credit facilities to make credit more easily available to households and
small businesses.
D) lowering the reserve requirement to encourage banks to create loans.
Ans: D) lowering the reserve requirement to encourage banks to create loans
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If the price elasticity of demand for a good is 0.8, then a
A) 1 percent rise in the price leads to a 0.8 percent decrease in the quantity demanded. B) one dollar rise in the price leads to a 0.8 percent decrease in the quantity demanded. C) 1 percent rise in the price leads to an 80 percent decrease in the quantity demanded. D) 1 percent rise in the price leads to an 8 percent decrease in the quantity demanded.
Other things the same, a fall in an economy's overall level of prices tends to
a. raise both the quantity demanded and supplied of goods and services. b. raise the quantity demanded of goods and services, but lower the quantity supplied. c. lower the quantity demanded of goods and services, but raise the quantity supplied. d. lower both the quantity demanded and the quantity supplied of goods and services.
As the price level rises, the exchange rate
a. falls, so exports rise and imports fall. b. falls, so exports fall and imports rise. c. rises, so exports rise and imports fall. d. rises, so exports fall and imports rise.
Explain the concept of inefficiency in terms of a production possibilities curve.
What will be an ideal response?