We study the simple model of competitive markets because it helps to:
A. show how poorly the economy actually functions.
B. provide useful insights to markets that are not perfectly competitive.
C. indicate whether buyers or sellers matter more.
D. show how the government controls the economy.
Answer: B
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The reason that the Fed does not actively use discount rate policy to control the money supply is because the Fed
a. acts when a majority of member banks agree on policy and the banks rarely agree. b. earns interest on discounting and cannot afford to lose the revenue. c. does not know how banks will respond to discount rate changes. d. has been directed by Congress to set the discount rate at a permanent level.
Under what circumstances will inflation help borrowers at the expense of lenders? Under what circumstances will both parties be unaffected? Which scenario would you expect in the long run?
A reduction in the rate of inflation is known as
A. disinflation. B. deflation. C. inflation. D. None of the above is correct.
All final goods and services that make up GDP can be expressed as
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