If we consider the relationship between the opportunity cost of holding money and velocity that existed in the 1980s, if the Fed followed the same policymaking in the 1990s and 2000s, would they have achieved the desired results? Explain.
What will be an ideal response?
Likely not. In the 1990s and 2000s the sensitivity of velocity to interest rates (opportunity cost of holding money) was far greater than it was in the 1980s. In fact, the sensitivity of money demand to changes in the interest rate rose by a factor greater than six. If the Fed had followed the same policy in the 1990s and 2000s they would not have the desired effect. This is a result of the variability in the velocity of money and how it can make monetary policymaking difficult.
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Starting from long-run equilibrium, a large decrease in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; lower; potential B. expansionary; higher; potential C. recessionary; lower; potential D. recessionary; lower; lower
In the figure above, if no one owns the lake, at the equilibrium quantity what is the marginal social cost of producing the pesticide?
A) $80 B) $40 C) $60 D) $30
When marginal private cost is equal to marginal social cost,
A. the activity in question generates no positive externality. B. the activity in question generates no negative externality. C. all positive externalities have been internalized. D. all negative externalities have been internalized. E. b or d
Control of water pollution from pesticide runoff in the United States is the responsibility of
a. the U.S. Department of Agriculture b. the Environmental Protection Agency c. state attorneys general d. state departments of agriculture e. state environmental protection agencies