Which of the following is not a tool the Fed uses to manage the money supply?
A) open market operations
B) setting the discount rate
C) expanding and contracting deposit insurance
D) setting reserve requirements for deposits in the banking system
Answer: C
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The substitution effect that occurs when interest rates change involves a change in consumption that develops from ________
A) a change in the general level of prices B) a period of increasing productivity C) a change in the level of income D) a change in the relative prices of consumption in the two periods
To avoid an increase in the local property tax, Sullivan County, New York, proposed a 2 percent hotel tax, which presumably would be passed on to tourists. The hotel industry argued that the tax would hurt hotel business. They are really arguing that
a. tourist and convention demand is inelastic, so hotel bookings will decline. b. tourist and convention demand is very elastic, so hotel bookings will decline. c. they would prefer a property tax increase instead. d. it is unfair to tax people who do not live in the area.
In a long-run equilibrium, a perfectly competitive firm's average total cost is
A. zero. B. higher than the market price. C. equal to average fixed cost. D. minimized.
A new idea was introduced in macroeconomic analysis during the early 1970s to describe the unusual combination of high inflation and high rates of unemployment. It was
a. stagflation b. the business cycle c. fine-tuning d. crowding out e. cost-push inflation