The existence of the time inconsistency problem in macro policy suggests which of the following?
A) Use fiscal and monetary policy to fine tune the economy.
B) Reduce the independence of the central bank.
C) Appoint someone who is more conservative (economically) than the rest of the government to head the central bank.
D) Intervene frequently in the foreign exchange market.
E) Eliminate rational expectations from econometric models used for forecasting.
C
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Refer to Figure 2-15. One segment of the circular flow diagram in the figure shows the flow of wages and salaries from market K to economic agents M. What is market K and who are economic agents M?
A) K = product markets; M = firms B) K = factor markets; M = firms C) K = product markets; M = households D) K = factor markets; M = households
During periods of inflation, all prices increase
a. True b. False Indicate whether the statement is true or false
Which of the following is true of inflation?
A. It occurs when the demand for a particular currency is more than the supply B. It occurs when securities are purchased in one market for immediate resale in another. C. It occurs when two parties agree to exchange currency and execute a deal at a specific date in the future. D. It occurs when the quantity of money in circulation rises faster than the stock of goods and service. E. It occurs when output increases faster than the money supply.
In Exhibit 3-16, assume that the market price of chairs is $5 each. This price is:?
A. ?an equilibrium price. B. not an equilibrium price, since there is an excess supply at a price of $5. C. ?not an equilibrium price, since there is an excess demand at a price of $5. D. ?not an equilibrium price, since the rate at which chairs are being supplied is great than the rate at which they are being demanded.