Answer the following questions true (T) or false (F)
1. In the circular flow model, households supply resources such as labor services in the product market.
2. A welding machine is an example of a factor of production if it is being used to produce automobiles.
3. One of the monetary policy goals of the Federal Reserve is price stability.
1. FALSE
2. TRUE
3. TRUE
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If a bond pays 11.5 percent interest a year and a bank deposit pays 3.5 percent, the opportunity cost of holding the deposit is:
a. 11.5 percent. b. 15 percent. c. 8 percent. d. 3.5 percent. e. 13.5 percent.
Other things equal. an open market purchase of government securities by the Fed will not result in which of the following?
a. increased bond prices b. a reduced volume of loans issued by the commercial banking system c. decreased interest rates d. an increase in the price level
Suppose foreign exchange markets anticipate a devaluation for country A. Further assume that policy makers in country A will continue to fix its nominal exchange rate. In order to peg the currency at its original level, which of the following must occur?
A) increase the domestic interest rate B) increase the domestic price level C) convince trading partners to raise their interest rates D) all of the above E) none of the above
Kathleen likes avocado and crab dip. After eating avocado and crab dip with four crackers, she switches to cheese with crackers. We can conclude that
A. Kathleen is no longer maximizing her utility. B. at this point cheese and crackers have a higher marginal utility per dollar spent than that of avocado and crab dip with crackers. C. the avocado and crab dip cannot have tasted that good. D. the avocado and crab dip with crackers now has a marginal utility of zero.