What was the dilemma that faced the European Central Bank in response to the sovereign debt crisis of 2010?
What will be an ideal response?
It could intervene to buy some of the debt, but doing so might increase further the amount of liquidity in the European financial system, raising expectations of higher future inflation. In addition, buying debt might be seen as approving the poor budgetary policies of some of the governments, thereby increasing moral hazard.
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If a new home can be constructed for $150,000, what is the opportunity cost of federal defense spending, measured in terms of private housing? (Assume a defense budget of $700 billion.)
Which group of people would be characterized as unemployed?
a. Those who are unwilling to work b. Those who are unable to find work c. Those who are unable to work d. Those who did not search for work e. Those who are too young to work
Choosing to spend now instead of to save is an example of consumer ______.
a. confidence b. debt c. expectations d. preferences
If the Federal Reserve wanted to change the money supply in the economy, it would be least likely to:
A. buy bonds on the open market. B. sell bonds on the open market. C. change the level of reserves required to be held by banks. D. change the federal funds rate.