Which of these tools in an example of monetary policy?
a. reducing income taxes
b. changing reserve requirements
c. increase government spending
d. borrowing money through deficit spending
Ans: b. changing reserve requirements
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Which of the following correctly describes a wage-price spiral?
a. An increase in nominal wages causes inflation, and inflation causes workers to demand even higher wages in order to keep their real income constant. This cycle can repeat itself. b. An increase in real wages due to growth in worker productivity causes inflation, which in turn increases worker productivity. c. A decrease in prices causes workers to demand higher wages, which in turn puts additional downward pressure on prices. d. None of the above.
Other things constant, if a labor union is able to successfully increase the wages of autoworkers, there will be
a. an increase in the supply of automobiles causing the price of automobiles to fall. b. an increase in the supply of automobiles causing the price of automobiles to rise. c. a decrease in the supply of automobiles causing the price of automobiles to fall. d. a decrease in the supply of automobiles causing the price of automobiles to rise.
Suppose Jack and Kate are at the town fair and are choosing which game to play. The first game has a bag with four marbles in it-1 red marble and 3 blue ones. The player draws one marble from the bag; if it is red, they win $20 and if it is blue, they win $1. The second game has a bag with 10 marbles in it-1 red, 4 blue, and 5 green. The player draws one marble from the bag; if it is red, they win $20; if it is blue, they win $5; and if it is green, they win $1. Both games cost $5 to play. If Jack only cares about expected value, and not risk, he should decide to play a game if:
A. the expected value of the payoff is higher than the expected value of the payoff in the other game. B. the expected value of the payoff is lower than the price to play the game. C. the expected value of the payoff is higher than the price to play the game. D. the expected value of the payoff is double the price to play the game.
Which of the following conditions do NOT exist in long-run equilibrium?
a. Domestic nominal interest rates are such that the supply of real balances is equal to demand. b. The domestic real return is equal to the foreign real return through the equilibrium exchange rate. c. There are no price level or exchange rate changes and therefore the expected future exchange rate is equal to the actual exchange rate. d. Domestic nominal interest rates are such that the supply of real balances is greater than demand.