Higher rates of inflation reduce spending because:
A. the Fed reacts to the higher inflation by lowering interest rates.
B. the real value of money increases.
C. the reduction in wealth, resulting from the reduced real value of money, restricts spending.
D. resources are redistributed from low-spending households to high-spending households.
Answer: C
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The capital and financial account balance is equal to
A) the value of exports of U.S. capital goods minus the value of imports of capital goods into the United States. B) exports minus imports. C) foreign assets owned by the United States minus U.S. assets owned by foreigners. D) U.S. investment abroad minus foreign investment in the United States. E) foreign investment in the United States minus U.S. investment abroad.
An employer would never operate on the upward-sloping part of an MRP curve because
A. he or she would not be maximizing profits. B. he or she would be hiring workers at wages above MRP. C. the number of workers is too large to get economies of scale. D. he or she would then have too little capital per worker.
An increase in wealth that doesn't affect labor supply would cause the IS curve to ________ and the FE line to ________.
A. shift up and to the right; shift left B. shift up and to the right; be unchanged C. shift down and to the left; be unchanged D. shift down and to the left; shift left
Which of the following real-world situations is the result of excess capacity in a monopolistically competitive market?
A. A factory producing women's clothing produces more than it can sell during a season. B. Monopolistically competitive firms do not exist in the real world. C. Gas stations with infrequently used pumps are located at all four corners of an intersection. D. A retail auto tire store orders too much inventory.