Should the Fed only have the single goal of price stability? Why or why not?
What will be an ideal response?
Having only a single goal has advantages because the Fed would not be distracted by other concerns, it would have enhanced credibility, and it would help to keep the Fed free of political pressures. However it would also mean not being able to use monetary policy to stabilize the economy in the same way as it is used at present. It should be noted, however, that some economists would think that even that last point is an advantage.
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The quantity theory of money assumes that the velocity of money:
a. is constant. b. will rise if the money supply rises and fall if the money supply falls. c. will rise if the money supply rises, but it will not change if the money supply falls. d. will fall if the money supply rises, and it will rise if the money supply falls. e. will fall if the money supply rises, but it will not change if the money supply falls.
A good is excludable if
a. one person's use of the good diminishes another person's enjoyment of it. b. the government can regulate its availability. c. it is not a normal good. d. people can be prevented from using it.
If the supply curve illustrates the quantities producers plan to sell at given prices, and the demand curve illustrates the quantities consumers plan to buy at given prices, then the plans of producers and consumers are fully coordinated at the point
where A) the supply curve lies above the demand curve. B) the supply curve intersects the demand curve. C) the demand curve lies above the supply curve. D) the amount of a good needed by consumers exactly equals the amount supplied by producers.
Refer to the figure above. If the monopolist faces a constant marginal cost of $6, at what price should it sell its output to maximize profits?
A) $2 B) $6 C) $10 D) $12