Refer to the figure above. What is the producer surplus before Lithasia opens up to free trade?
A) $6
B) $12
C) $18
D) $24
B
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The sale of government securities by the Fed leads to
A) a decrease in bank reserves. B) a contraction in bank lending. C) a decrease in the monetary base. D) All of the above answers are correct.
The problems of raising the level of the inflation target include
A) if the zero-lower-bound problem is rare, then the benefits of a higher inflation target are not very large. B) the costs of higher inflation in terms of the distortions it produces in the economy are high. C) it is more difficult to stabilize the inflation rate at a higher targeting level. D) all of the above.
Refer to Figure 5.6. Which diagram shows an increase in income with bread being inferior and soup being normal?
A. A
B. B
C. C
D. D
Economic profits and losses are TRUE market signals because they
A) convey information in an asymmetrical fashion. B) convey information about rewards people should anticipate experiencing by shifting resources from one activity to another. C) convey information to public officials about where to encourage people to invest and what skills people should develop. D) cause people to move into careers in both undesirable and desirable industries with equal ease.