What is a market economy?
What will be an ideal response?
A market economy is an economy in which the decisions of households and firms interacting in markets allocate economic resources.
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This group consists of seven members appointed by the President of the United States for 14-year terms
A) the presidents of the Federal Reserve Banks. B) the members of the Federal Open Market Committee. C) the members of the Board of Governors of the Federal Reserve System. D) None of the above answers are correct.
In the above figure, suppose the demand for dollars temporarily increases so that the demand curve shifts to D1. To maintain the target exchange rate, the Fed
A) can sell dollars. B) can buy dollars. C) must violate interest rate parity but not purchasing power parity. D) cannot maintain the target exchange rate.
A central bank commitment to a ________ rule for monetary growth can be conveyed by maintaining a ________ exchange rate
A) rigid, fixed B) rigid, flexible C) flexible, fixed D) non-inflationary, flexible
During recessions, the value of collateral decreases and corporate profits decrease, so firms do not have cash to finance new investment projects. Therefore, credit rationing depends on the state of the economy. This situation is known as the
A) risk acceptance cost. B) lender's dilemma. C) default premium. D) financial accelerator.