Explain why it is difficult to determine expected real rates of interest
What will be an ideal response?
It is difficult to determine expected real rates of interest because we never know exactly what inflation rates people anticipate. One approach is to use the judgments of professional forecasters, such as those that appear in The Economist magazine.
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Why will a profit-maximizing, single-price monopoly NEVER produce the amount of output that maximizes its total revenue?
What will be an ideal response?
As of 2013, the outstanding U.S. currency is more than $1 trillion, which suggests that the typical U.S. citizen holds $3,600 in cash. Is this an accurate inference? Why?
A) Yes; because dividing total currency by total U.S. population roughly works out to $3,600 per person. B) No; because criminals and foreigners hold large sums of dollars, so the average citizen holds far less. C) No; because the average citizen probably does not have $3,600 in her checking account. D) Yes; because the Fed rarely makes accounting mistakes when computing M1. E) none of the above
International trade is the major cause of rising income inequality in the United States
Indicate whether the statement is true or false
An increase in the money supply is likely to reduce
A. interest rates. B. nominal income. C. the general price level. D. money demand.