Which of the following occurs when the economy experiences inflation?
A. The free-rider problem.
B. Micro instability.
C. Government failure.
D. Macro instability.
Answer: D
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In a simplified banking system with a 20 percent required reserve ratio, a $1,000 open-market sale by the Fed would cause the money supply to:
a. increase by $200 b. decrease by $200. c. decrease by $5,000 d. increase by $5,000.
Rational expectations theory suggests that government or central bank policies designed to change aggregate demand will be effective
a. True b. False Indicate whether the statement is true or false
Suppose China can produce either 300 telephones or 200 DVD players, and Japan can produce either 200 telephones or 100 DVD players. Implicitly, Japan has
A. Both an absolute and a comparative advantage in telephones. B. Neither a comparative nor an absolute advantage in telephones. C. A comparative but not necessarily an absolute advantage in telephones. D. An absolute but not necessarily a comparative advantage in telephones.
Saving is a basic source of investment financing.
Answer the following statement true (T) or false (F)