One cost of unanticipated inflation is:
A. both lenders and borrowers lose.
B. arbitrary redistributions of income.
C. nominal income falls below real income.
D. people cannot repay their debts.
Answer: B
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The accompanying supply-demand diagram shows the market for calculators. The initial price of calculators is P0, and the initial quantity exchanged is Q0.
Which of the following situations could be correctly illustrated by the diagram?
a. Graphing capabilities and other new features lead people to buy more calculators.
b. The cost of memory chips used in calculators falls, lowering the price of calculators.
c. Personal computerized notepads with substantial computing power are introduced, reducing people's need for calculators.
d. A heavy tariff is placed on calculators imported from overseas.
In a simple economy without government or the foreign sector, saving must equal investment because output is divided into consumption and investment, and income is either consumed or saved
Indicate whether the statement is true or false
Which of the following is not true of Federal Reserve notes? a. They are fiat money
b. They are a liability of the Fed. c. They are redeemable for other Federal Reserve notes. d. They are redeemable for gold. e. They are counted as currency in the money supply
In drawing a straight-line production possibilities curve for an economy that produces oil and corn, we assume that resources (for example, the number of labor hours)
a. are fixed b. increase at a constant rate c. increase at an increasing rate d. increase at a decreasing rate e. are not uniform, such as a variety of skills and quality of work