A rise in the price level that reduces the real wealth of people who hold financial assets is an illustration of the:
a. interest rate effect.
b. monetary theory.
c. supply-side theory.
d. wealth effect.
e. trade effect
d
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If average variable cost exceeds average fixed cost at a particular level of output: a. Profits must be positive
b. That fact is meaningless for deciding the quantity of output to produce. c. It is more likely that the output level is low relative to the designed capacity of the production facility than that the output level is low relative to the designed capacity of the production facility. d. Both b and c. are likely true.
When the FDIC took over the Chicago-based Continental Illinois Bank, it
a. refused to guarantee any of the bank's deposits even though the bank was insured by FDIC because the bank had engaged in illegal practices b. covered its deposits before allowing the bank to be taken over by the Treasury c. allowed Continental to fail in order to set an example to other banks that engaged in overly risky loan ventures d. sold Continental at a bargain price to Citibank e. announced it would cover every deposit—without limit—to keep Continental alive
Explain why an increase in expected inflation will result in an increase in nominal interest rates, holding other factors constant.
What will be an ideal response?
The primary function of central banks is to:
A. increase risk and volatility to increase compensation. B. increase the uncertainty that firms face in making investment decisions. C. eliminate the need for banks to collect financial information. D. control inflation, as well as help reduce the size and frequency of business cycle fluctuations.