Which institutions can create money?
A. Mutual funds and retirement funds
B. The government and its agencies
C. The Fed and the banks
D. Households and corporations
Answer: C
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Answer the following statement(s) true (T) or false (F)
1. A firm earns a positive economic profit when the market price exceeds its marginal cost. 2. As long as profits remain positive, a firm will want to increase the quantity produced. 3. Only variable costs are relevant to a firm's decision to shut down. 4. When a firm has chosen to shutdown it has exited the industry. 5. A competitive firm will exit the industry in the long run if the price of its product falls below its average cost.
With an increase in the demand for a good, if prices are not allowed to increase:
A) social surplus will be maintained at maximum. B) there will be no incentive for firms to increase the quantity supplied of the good. C) a surplus will occur in the market. D) there will be an increase in overall efficiency in the market.
The self-correcting property of the economy means that output gaps are eventually eliminated by:
A. increasing or decreasing potential output. B. government policy. C. decreasing inflation only. D. increasing or decreasing inflation.
All of the following could represent the transmission of monetary policy, except:
A. net exports changing. B. households altering their spending on durable goods. C. firms altering their growth plans. D. income tax rates changing.