Suppose we observe people buying more of a good even though its price has risen. What would an economist conclude?
A) Impossible! We will never observe prices and quantity simultaneously rising in the real world.
B) The demand curve for the good must be upward-sloping.
C) The law of demand doesn't hold.
D) The demand curve has shifted to the right.
E) Consumption increasing as prices increase only occurs when a good is needed for survival.
D
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Suppose the price of one euro is fixed at $1.00. A Dutch oil company discovers new oil reserves in the North Sea and offers the oil for sale. If a flexible system is allowed, then what is the impact on the foreign exchange rate?
a. A dollar becomes worth one euro. b. The euro depreciates relative to the dollar. c. A dollar becomes worth two euros. d. The euro appreciates relative to the dollar.
Which of the following statements is true about fiscal policy lags?
A) Automatic stabilizers have a much shorter impact lag than discretionary fiscal policy. B) Although the recognition lag is equally long for discretionary fiscal policy and for automatic stabilizers, the latter avoid implementation lag because automatic stabilizers are triggered automatically. C) Unlike discretionary fiscal policy, automatic stabilizers respond automatically to changes in the economy, thus avoiding the recognition and implementation lags. D) Although automatic stabilizers have a much shorter lag, discretionary fiscal policy instruments have a more potent impact on the economy because they are more precise.
Automatic stabilizers stabilize the level of real GDP because:
A. Congress quickly passes laws that change spending and tax revenue. B. federal expenditures and tax revenues change as the level of real GDP changes. C. the spending and tax multiplier are constant. D. wages are controlled by the minimum wage law.
The rate of return on short-term U.S. government bonds is often referred to as the:
A. federal funds rate. B. discount rate. C. risk-free interest rate. D. yield rate.