Suppose you have $2000 in currency in a shoebox in your closet. One day, you decide to deposit the money in a checking account. How will this action affect the M1 and M2 definitions of the money supply?
A. Both M1 and M2 will remain unchanged
B. M1 will decrease and M2 will increase
C. Both M1 and M2 will increase by $2000
Ans: A. Both M1 and M2 will remain unchanged
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It is possible to distinguish a monopoly from perfect competition by noting that only competitive firms can earn economic profits in the short run.
Answer the following statement true (T) or false (F)
In a fixed exchange rate system,
A. A balance-of-payments deficit can be corrected by expansionary fiscal and expansionary monetary policies. B. A country can eliminate a surplus of its currency by eliminating its protectionist barriers to trade. C. The capital account surpluses must offset current account deficits. D. Excess demand for a currency is eliminated by using foreign exchange reserves to increase demand.
Alex and Ben are both loggers wanting to harvest timber from the same forest. Alex prefers to harvest and replant at a sustainable rate; Ben wants to harvest as many trees as possible to maximize short-run profit, and then move on. They face the same
production costs. Refer to the information given. If no explicit property right is given over the forest land, then: A. a property right will be established when trees are cut down and brought to market. B. there is no property right over the harvested timber. C. Alex and Ben will likely work out an agreement on harvesting and replanting the land. D. that implies that government owns and regulates its use.
When taxes are a function of income, the investment multiplier, government spending multiplier, and tax multiplier are all less than they would be if taxes were a lump sum amount.
Answer the following statement true (T) or false (F)