To achieve long-run equilibrium in an economy with a recessionary gap, without the use of stabilization policy, the inflation rate must:
A. not change.
B. increase.
C. decrease.
D. either increase or decrease depending on the relative shifts of AD and AS.
Answer: C
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All of the following are possible funding sources for the government EXCEPT
A) user charges. B) taxes. C) interest income collected from government bonds. D) borrowing.
Transactions costs prevent purchasing power parity from holding because:
A. they make creating exchanges too costly in some places. B. they include the expense of transporting the goods to be sold in another country. C. the price of a good sold in another country must include the cost of getting it there, which can be high and cause a large price differential. D. All of these statements are true.
The avoidance of a worst case scenario strategy in a two-firm balanced oligopoly can best be described as a strategy
a. taken by the more powerful of the two firms, the other follows to avoid a worst case outcome b. taken by the less powerful of the two firms in order to avoid a worst case outcome c. that is best for the firm regardless of the strategy taken by its rival d. that avoids a Nash equilibrium outcome e. that allows both firms to obtain cartel-like profits
If the demand for a consumer good increases, the demand for resources required to make the good will
a. remain the same, but the quantity demanded will increase. b. decrease if the demand for the consumer good is inelastic, otherwise the demand will increase. c. stay the same, but the quantity demanded will decrease. d. increase.