What is the misery index? Why do economists find it to be a flawed measure?
What will be an ideal response?
The misery index is calculated by adding the unemployment rate to the inflation rate to show the economic discomfort both economic factors impose on the economy. The problem with the index is that it is like adding “apples to oranges.” The two economic factors are quite different in meaning and effects. The effects also can differ based on the level of each factor for the economy. For example, unemployment can be rising and inflation can be falling, but that does not mean that the problem for the economy with the rise in unemployment is offset by the decline in inflation as occurred during the Great Recession of 2007–2009.
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A bank has checkable deposits of $1,000,000, loans of $600,000, and government securities of $400,000. If the required reserve ratio is 5 percent, the amount of required reserves is
A) $100,000. B) $30,000. C) $50,000. D) $80,000. E) $20,000.
Define "externality." Give an example of an external cost. Explain why resources will not be allocated efficiently if externalities are present. How can the problem of externalities be addressed?
What will be an ideal response?
Which of the following would shift the supply curve for CDs to the right?
a. a decrease in the price of materials used to make CDs b. a rise in the cost of labor used to make CDs c. an increase in the price of audio cassettes d. a decrease in the number of suppliers e. an increase in the price of CDs
Transfer prices can be set in such a way so as to maximize profits for an entire business
Indicate whether the statement is true or false