How are the fundamental economic questions answered in a market economy?
A) Large corporations alone decide the answers.
B) Households and firms interact in markets to decide the answers to these questions.
C) Individuals, firms, and the government interact in markets to decide the answers to these questions.
D) The government alone decides the answers.
B
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The concurrent problems of inflation and unemployment are termed:
a. depression. b. downturn. c. deflation. d. demand-pull inflation. e. stagflation.
The Federal Reserve (Fed) was criticized for playing a role in causing the Great Recession. Which of the following criticisms most accurately captures this criticism?
a. The Fed kept monetary policy loose for too long, thereby fueling speculation in the housing market. b. The Fed kept monetary policy too tight immediately after the 2001 recession and then loosened it just prior to the recession, thereby precipitating the crisis. c.The Fed relaxed banking regulations after the 2001 recession, causing banks and other financial institutions to engage in speculative activities for which they were unprepared. d. The Fed encouraged home ownership by putting pressure on Fannie Mae and Freddie Mac.
An increase in the rate of interest would increase
A. the opportunity cost of holding money. B. the transactions demand for money. C. the asset demand for money. D. the price of bonds.
How does a government budget deficit occur?
A. If a nation carries a public debt, it must be running a deficit every year. B. A government's tax revenues exceed its spending. C. A nation earns more on exports than it spends on imports. D. A government's spending exceeds its tax revenues.