When people are holding money in excess of their demand for real money balances ________
A) the nominal interest rate will fall
B) they increase their purchases of goods and services
C) the central bank buys bonds to correct the imbalance
D) all of the above
E) none of the above
A
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When there is a recessionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; decline B. increase; raise; decline C. decline; lower; expand D. decline; raise; decline
The median voter model
A) works well in the area of trade policy. B) is not intuitively reasonable. C) tends to result in biased tariff rates. D) does not work well in the area of trade policy. E) is not widely practiced in the United States.
Governments impose excise taxes on goods that have inelastic demand, such as cigarettes, more often than in other cases. Why?
What will be an ideal response?
For a firm in a perfectly competitive market, a price decrease:
A. lowers the profit-maximizing quantity. B. is unrelated to the profit-maximizing quantity. C. increases the profit-maximizing quantity. D. signifies the firm should leave the market.