The economy pictured in the figure below has a(n) ________ gap with a short-run equilibrium combination of inflation and output indicated by point ________. 
A. recessionary; B
B. recessionary; C
C. recessionary; A
D. expansionary; A
Answer: C
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Dollar bills in the modern economy serve as money because
A) they can be redeemed for gold by the Federal Reserve. B) they are backed by the gold stored in Fort Knox. C) they have value as a commodity independent of their use as money. D) people have confidence that others will accept them as money.
To maximize the social pie, a tax on pollution must equal the external cost created by the polluting activity
Indicate whether the statement is true or false
An investor was promised an interest of 9 percent on a loan given out in 2007 that matured in 2011 . However, in real terms, he received an interest of only 7 percent in 2011 . This implies: a. the rate of inflation in 2011 was 7 percent. b. there was negative inflation in 2007
c. the rate of inflation in 2011 was 2 percent. d. there was hyperinflation in 2007.
Which one of the following is NOT included in GDP?
A. You volunteer to organize a neighborhood watch group on your block. B. A mail-order firm constructs a new warehouse in Kansas as a central distribution facility. C. You pay your monthly apartment rent. D. The federal government pays a defense contractor to develop a new weapons system.