Economic studies have shown that countries that have high inflation rates have lower rates of economic growth than do countries with low inflation rates. Explain what underlies this relationship between inflation and economic growth
What will be an ideal response?
In terms of the issues discussed in this chapter, inflation reduces the usefulness of currency as a store of value and as a standard of deferred payment. In extreme cases, high rates of inflation have led to a shift to a barter system or to the use of foreign currency as a medium of exchange. These effects would tend to reduce the efficiency of the economy and the rate of economic growth.
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A country produces only apples and bananas. Moving from point A to point B along its production possibilities frontier, 5 apples are forgone and 4 bananas are gained. What is the opportunity cost of a banana?
A) 1 banana B) 5/4 of an apple C) 4 apples D) 4/5 of an apple E) None of the above answers is correct.
The quantity demanded of a good
a. is the amount that would be purchased with an unlimited income b. is the amount that would be demanded even if income were zero c. is subject to the buyer's income constraints d. is a fixed amount unaffected by the buyer's circumstances e. must match the amount actually purchased in the market
Although the Fed can destroy money, it is impossible for the Fed to create money out of thin air
Indicate whether the statement is true or false
That an increasing number of jobs that do not pay enough to subsist on is ____ theory of poverty.
A. a conservative B. a liberal C. both a liberal and a conservative D. neither a liberal nor a conservative