Discuss the relative merits of monetary policy under conditions of demand-pull inflation or recession.
What will be an ideal response?
Monetary policy may have the upper hand in reducing demand-pull inflation. The Federal Reserve can conduct open-market operations relatively swiftly. The tough decision-making is also isolated from political pressure. Monetary policy has also been successful in reducing inflation. Also, monetary policy can stimulate an economy during recession. But there are limits in this situation. An expansionary monetary policy may not be effective if business expectations have fallen to the point that low interest rates will not induce firms to borrow and purchase new capital.
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Explain the margin requirement for financial futures and how marking to market affects the margin account
What will be an ideal response?
Which of the following statements is FALSE about opportunity cost?
A) Cost is always foregone opportunity. B) Opportunity cost is the next best alternative. C) John wants a burger and fries. The concept of opportunity cost applies even though he has enough funds to buy both. D) Opportunity cost exists only for goods with monetary values.
Suppose the Chinese central bank wants to keep the exchange rate of its currency value constant over time. An increase in the demand for Chinese goods by American residents will lead the Chinese central bank to
A) coordinate with the U.S. central bank in order to increase the supply of the U.S. dollar in the foreign exchange market. B) increase the demand for the Chinese currency in the foreign exchange market. C) use its dollar reserves to buy the Chinese currency in the foreign exchange market. D) sell the Chinese currency in exchange for U.S. dollars in the foreign exchange market.
Aggregate output will decrease if there is a(n)
A. unplanned fall in inventories. B. decrease in consumption. C. unplanned rise in inventories. D. increase in saving.