Over time, which of the following will most likely result from a depreciation in the exchange rate of the dollar?
a. Inflation will decline.
b. Foreign goods will cost Americans less, and therefore, the imports of Americans will rise.
c. U.S. goods exported abroad will cost less in foreign countries, so foreigners will buy more of them.
d. U.S. goods exported abroad will cost more in foreign countries, so foreigners will buy fewer of them.
C
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Which of the following increases the equilibrium price of a used car and decreases the equilibrium quantity?
A) an announcement by the U.S. Attorney General that the windows on older cars were made with cheaper glass that can explode at high speeds B) new federal legislation that raises the legal driving age to twenty-four in all states C) a new fee that used car dealers must pay to the government on all sales of used cars D) all of the above because each is consistent with the "law of demand"
Which of the following is not a power of the Federal Reserve System?
a. Setting the prime interest rate b. Issuing Federal Reserve notes c. Buying and selling U.S. government securities d. Extending loans to member banks e. Clearing checks
As inflation drives up prices, people attempt to find substitutes and adjust what they buy. The resulting substitution bias problem causes the CPI to:
A. overstate the impact of higher prices on consumers. B. consistently underestimate the true inflation rate. C. omit the benefits of product quality improvements. D. have larger fluctuations than other price indexes.
The IS curve will shift down and to the left when
A. desired saving declines. B. consumption increases. C. the expected future marginal product of capital declines. D. government purchases increase.