Your friend Shahla argues that inflation is bad for the economy because it lowers everyone's purchasing power. How would an economist respond to Shahla's statement?
a. Her statement is true.
b. Her statement is false because inflation redistributes income but does not change the average level of income in the economy.
c. Her statement is true when everyone's nominal income changes by the same amount.
d. Her statement is true when wages and benefits are not indexed to the CPI.
e. Her statement is true only in a closed economy.
B
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If the Federal Reserve conducts an open market purchase, the
A) interest rate will not change. B) interest rate will increase. C) money supply is decreased. D) interest rate will decrease.
Explain the utilitarianism principle. How is it deficient?
What will be an ideal response?
Which of the following statements is true about Say's law?
a. It states that supply creates its own demand. b. It states that demand creates its own supply. c. It states that total output will always exceed total spending. d. It states that consumption spending is the most volatile component of aggregate expenditures. e. It is a major proposition of the Keynesian model.
Karl can produce either 10 tons of oranges or 5 tons of apples in a year, while Adam can produce either 5 tons of oranges or 10 tons of apples. Which of the following would be mutually beneficial terms of trade between Karl and Adam?
a. 1 ton of apples per 2 1/2 tons of oranges b. 1 ton of apples per 1 1/2 tons of oranges c. 1 ton of apples per 1/4 ton of oranges d. 1 ton of apples per 1/5 ton of oranges