Compare how money was backed in the past with how it is backed today and explain what prompted this change.
What will be an ideal response?
Answers will vary but students should demonstrate understanding of how money was backed in the past (the gold standard) and how it is backed today (faith in the value and convertibility of currency, as well as in the government). Answers should also explain that the change was due to the United States phasing out gold and silver currency, which happened in part because the price of these metals became so high that the metal in coins had an intrinsic worth greater than the face value of the coins, leading people to hoard coins or even melt them down. Students may note that this demonstrates Gresham’s law: “Cheap money drives out dear money.”
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What will happen to the annual rate of growth of per capita real GDP if the annual rate of population growth increases and the annual rate of growth of real GDP goes down?
A) It will increase since an increase in population means an increase in labor that translates into an increase in real GDP. B) It will increase since the annual rate of growth of real GDP does not influence the growth rate of per capita real GDP. C) It will decrease since an increase in the growth rate of population and a decrease in the growth rate of real GDP both work to decrease the growth of per capita real GDP. D) The effect will depend upon whether the rate of population growth is greater than or less than the rate of growth of real GDP.
Which of the following is NOT a possible resolution of externalities?
a. Coasian bargaining b. regulatory directives c. taxes and subsidies d. cap and trade e. all of the above are possible resolutions of externalities
To promote long-term economic growth, national governments should:
a. Increase government spending and reduce taxes. b. Reduce government spending and increase taxes. c. Establish fair rules of behavior and provide the means to enforce them. d. Promote research and development with federal funds. e. Impose tariffs and quotas until the nation is on its feet.
A firm that produces a good with many substitutes will most likely find that:
A. raising its price will increase total revenue. B. lowering its price will not affect total revenue. C. lowering its price will increase total revenue. D. lowering its price will decrease total revenue.