Comment on the following statement: "I decided to buy a car from a dealer in a town 100 miles away because he was offering a price that was $100 lower than the dealer in my hometown. Therefore, I saved $100."
What will be an ideal response?
Assuming that the individual had no other reason to travel the 100 miles, the savings from the purchase of the car is less than $100 . Travel costs should be taken into account, including the opportunity cost of time.
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What factors can start a cost-push inflation? What must the Fed's response be for the inflation to continue?
What will be an ideal response?
Assume that the expectation of a recession next year causes business investments and household consumption to fall, as well as the financing to support it. If the nation has low mobility international capital markets and a fixed exchange rate system, what happens to the real exchange rate and the monetary base in the context of the Three-Sector-Model? Assume the nominal exchange rate is stated
as: (foreign currency per domestic currency). a. The real exchange rate rises and monetary base rises. b. The real exchange rate falls and monetary base falls. c. The real exchange rate rises and monetary base falls. d. The real exchange rate and monetary base remain the same. e. There is not enough information to determine what happens to these two macroeconomic variables.
During a severe recession, the government decides to lower its tax rates to give consumers relief, and allow them to pay less in taxes. This is an example of:
A. an automatic stabilizer. B. expansionary fiscal policy. C. contractionary fiscal policy. D. discretionary fiscal policy.
Perfectly inelastic demand has an elasticity value of 1.
Answer the following statement true (T) or false (F)