Free trade refers to trade between countries without government restrictions
Indicate whether the statement is true or false
TRUE
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A system in which depository institutions hold reserves that are less than the amount of total deposits is called
A) central banking system. B) required reserve banking. C) fiat money banking. D) fractional reserve banking.
Use the aggregate expenditures model and assume an economy is in equilibrium at $6 trillion which is $500 billion above full-employment GDP. If the marginal propensity to consume (MPC) is 0.75, full-employment GDP can be reached if government spending:
a. decreases by $75 billion. b. decreases by $125 billion. c. decreases by $500 billion. d. is held constant.
Entrepreneurs are vitally important for economic progress because they
What will be an ideal response?
Suppose that the inflation rate has been 2 percent per year for several years, and the unemployment rate has been stable at 4 percent. Unanticipated changes in government policy cause the inflation rate to increase to 4 percent. In the short run, we would expect the unemployment rate to
A. decrease. B. increase to 7 percent. C. increase, but the exact amount cannot be known for sure. D. remain constant.