Recall the Application about how the collapse of the housing boom and the worldwide recession of 2007 led to problems for some countries in the Euro-zone to answer the following question(s). When the euro was launched in 1999, the vision of its founders was to use the monetary union to further unify Europe economically and politically. They envisioned a large economic market, comparable to the United States with integrated goods and financial markets. They believed that by moving to a single currency with agreements on a number of fiscal rules that they could achieve economic stability and growth.Recall the Application. Greece faced a major financial crisis in 2010 as its budgetary imbalance became quite severe. Since Greece is a member of the Euro-zone, it could no longer ________ as a
potential solution to its financial problems.
A. depreciate its currency
B. cut spending
C. raise taxes
D. reduce wages and prices
Answer: A
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The self-correcting tendency of the economy means that falling inflation eventually eliminates:
A. exogenous spending. B. recessionary gaps. C. expansionary gaps. D. unemployment.
Assume that the supply curve for a commodity shifts to the right and the demand curve shifts to the left, both by the same degree. Then, in comparison to the initial equilibrium, the new equilibrium will be characterized by:
A) a lower price and quantity. B) a higher price and quantity. C) a lower price and the same quantity. D) a higher price and the same quantity.
Jake spends $200 on fried chickens and Pepsi. The price of a fried chicken is $5 and Pepsi is $2.50 per bottle. With the quantity of Pepsi being measured along the vertical axis, the slope of Jake's budget line is ________ per fried chicken
A) 0.5 of a Pepsi B) -0.5 of a Pepsi C) 2 Pepsis D) -2 Pepsis
Refer to Figure 17-3. Assume Panel B represents the labor supply curve. Which of the following statements about Panel B is true?
A) Panel B describes a situation in which the income effect dominates the substitution effect at every level of wages (segments i, ii, and iii). B) Panel B describes a situation in which the income effect dominates the substitution effect at low wages (segment i) and a situation in which the substitution effect dominates the income effect at very high wages (segment iii). C) Panel B describes a situation in which the income effect dominates the substitution effect at low wages (segment i) and again at very high wages (segment iii). D) Panel B describes a situation in which the substitution effect dominates the income effect at low wages (segment i).