When the price of a pizza is quoted in dollars, this is an example of dollars serving as:
A. a store of value.
B. a medium of exchange.
C. a unit of account.
D. barter.
Answer: C
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The crowding out effect is often associated with
A) a temporary increase in taxes. B) the reinforcing impact of state and local tax changes on federal tax changes. C) the impact of a tax rate increase when the aggregate supply function is horizontal. D) an increase in the interest rate caused by government borrowing.
In an open economy, a shift down and to the left of the IS curve could have been caused by
A) a decline in the foreign real interest rate. B) an increase in the demand for domestic goods relative to foreign goods. C) an increase in foreign output. D) a decline in domestic output.
The lack of capital in developing nations causes
A. the savings rate to be too high. B. consumption rates to be too high. C. output to be low in the present but high in the future. D. labor productivity to remain low.
In Figure 3-5 above, saving is zero at
A) point J. B) point K. C) point L. D) none of the above because saving is never equal to zero under the conditions described in the graph.