Suppose Mike and Renee are the only two people in a very simple economy and that they produce and exchange two goods, soda and pretzels. Which of the following might cause a recession in this simple economy?
a. Mike gets the idea that Renee wants more soda, which Mike produces.
b. Renee gets the idea that Mike wants more pretzels, which she produces.
c. Mike gets the idea that Renee wants less soda, which he produces.
d. Renee gets the idea that Mike wants less soda, which he produces.
e. The production of pretzels being equal to the production of soda.
C
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Suppose that the United Kingdom pegs the pound to the euro. If all other things remain unchanged, what would you expect to happen to European interest rates if all countries who use the euro decided to adopt expansionary fiscal policies?
A) They would rise. B) They would fall. C) They would not change. D) That cannot be determined using the information provided.
In the above figure, market equilibrium at point E yields the quantity X. The quantity is the socially optimal quantity. Point E indicates that currently there is
A) a negative externality. B) a positive externality. C) a public good. D) a positive externality with subsidy.
If the cost of acquiring more information outweighs the benefit of having more information about a good, then we can predict:
A. the exchange will take place, but will be regretted in the future. B. the exchange will definitely not take place. C. the exchange may take place anyway. D. the exchange will not benefit anyone.
The Balance of Payments