Which of the following statements best characterizes the Classical view of business cycles?
A. Fluctuations in business activity are to be expected and should be accepted.
B. The appropriate macroeconomic policy can eliminate fluctuations in business activity.
C. Fluctuations in business activity occur in regular and predictable patterns.
D. Business cycles are symptoms of underlying problems and should be addressed by macroeconomic policy.
Answer: A
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A year over year ________ in the buying power of money means that definitely ________ from one year to the next
A) decrease; the price level increased B) increase; inflation increased C) decrease; inflation increased D) increase; the price level increased E) Both answers A and C are correct.
Ceteris paribus, if the market demand for a product decreases, then equilibrium quantity will (be) ____ and equilibrium price will (be) ____
a. increase; increase b. indeterminate; decrease c. indeterminate; increase d. decrease; decrease
Which of the following statements is not correct?
a. Government policies may improve the market's allocation of resources when negative externalities are present. b. Government policies may improve the market's allocation of resources when positive externalities are present. c. A positive externality is an example of a market failure. d. Without government intervention, the market will tend to undersupply products that produce negative externalities.
The balance of payments constraint refers to the limits on:
A. exchange rate policy imposed by flexible exchange rates. B. currency convertibility observed in most developing countries. C. domestic macroeconomic policy, arising from a shortage of international reserves. D. macroeconomic policy resulting from IMF conditionality.