If the economy is experiencing high rates of inflation due to a new housing bubble, what effects would expansionary monetary policy have on the economy?
A) It would reduce inflation as well as unemployment.
B) It would raise inflation as well as unemployment.
C) It would reduce inflation but cause unemployment to rise.
D) It would raise inflation but would cause unemployment to fall.
Ans: C) It would reduce inflation but cause unemployment to rise.
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What will be an ideal response?
A problem that exists when naturally occurring incentives encourage sufficient numbers of people to act in a way that makes everybody worse off is called a
A) zero-sum problem. B) cause-and-effect problem. C) collective action problem. D) trade-off.
The price of peaches goes up and I observe you buying fewer strawberries. Which of the following is consistent with this observation:
A. Strawberries are inferior and peaches are normal. B. Strawberries are normal and peaches are inferior. C. Both strawberries and peaches are inferior. D. Both (a) and (b). E. Both (a) and (c). F. Both (b) and (c). G. All of the above.
When the Fed lowers the required reserve ratio, it:
a. lowers the cost of borrowing from the Fed, encouraging banks to make loans to the general public b. raises the cost of borrowing from the Fed, discouraging banks from making loans to the general public. c. increases the amount of excess reserves that banks hold, encouraging them to make loans to the general public. d. increases the amount of excess reserves that banks hold, discouraging them from making loans to the general public. e. decreases the amount of excess reserves that banks hold, discouraging them from making loans to the general public.