Which of the following is the best example of a microeconomic topic?
A. The impact that the money supply has on inflation.
B. The reasons for increases in the price of soft drinks.
C. The effect that federal budget deficits have on the interest rate.
D. The tradeoff between inflation and unemployment.
Answer: B
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If Thailand fixes the foreign exchange value of its currency and follows a highly expansionary monetary policy,
a. Thailand will be unable to maintain both the fixed-exchange rate and the full convertibility of its currency b. Thailand will experience rapid economic growth. c. it will be easier for Thailand to engage in international trade. d. Thailand will have relatively low rates of inflation.
If there is a shortage in a free market, then
A) consumers will offer to pay a lower price for the good, and the price will fall toward the equilibrium level. B) consumers will offer to pay a higher price for the good, and the price will rise toward the equilibrium level. C) suppliers will decrease their output to match demand. D) suppliers will accept any price below equilibrium.
________ arises when one party to a contract changes behavior in response to that contract, passing the cost of that change in behavior to the other party.
A. Moral hazard B. Market signaling C. Logrolling D. Adverse selection
Compared to commercial banks and thrift institutions, finance companies are
A) heavily regulated. B) able to attract small depositors. C) prevented from making relatively small loans. D) virtually unregulated.