What are some of the explanations offered for why the U.S. economy experienced a period of relative stability from 1950-2007?
What will be an ideal response?
1. Services have become a much larger fraction of GDP in the United States since 1950, and goods manufacturing has dropped from 40% of GDP to 12% of GDP. Manufacturing production fluctuates much more than does the production of services.
2. Since 1950, there has been a significant increase in unemployment insurance and other transfer program availability. These make it possible for workers who lose their jobs during a recession to have higher incomes and therefore spend more. The increased spending helps to shorten the duration of recessions.
3. The federal government has become much more active in implementing stabilizing policies since 1950. Using policy measures has tended to decrease the severity of recessions and prolonged expansions.
4. Since 1950, the financial system has become much more stable, making credit more readily available during recessions, thereby increasing spending and lessening the severity of recessions. The financial crisis of 2007-2008 showed evidence of a return to financial instability.
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What would the Fed have done if it had tried to keep the exchange rate at its 2001 level?
A) buy dollars and sell euros B) sell dollars and sell euros C) sell dollars and buy euros D) buy dollars and buy euros E) None of the above is correct because the Fed cannot affect the exchange rate.
Which of the following is a defining characteristic of oligopoly?
A) barriers to entry B) selling a homogeneous good C) selling a differentiated good D) collusion
The potential for redistribution cannot be exaggerated
Indicate whether the statement is true or false
A series of ascending indifference curves is called
a. a demand curve b. a budget constraint c. an indifference map d. marginal-utility-to-price ratio curves e. consumer surplus