When there is an expansionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; expand
B. increase; raise; decline
C. decline; lower; decline
D. decline; raise; decline
Answer: B
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The distribution of income in the United States is characterized by the following relationship between the mean, median, and mode incomes
A) mean income < median income < mode income. B) mode income < median income < mean income. C) median income < mean income < mode income. D) mode income < mean income < median income.
The cost of capital can be thought of as the rate of return required by investors in the firm's securities
a. true b. false
The major things to remember about relative purchasing power parity are:
a. Long-run changes in the value of a nation's currency value depend on the country's inflation rate relative to foreign nations, and short-term exchange rate changes depend mainly on interest parity relationships. b. The higher a nation's relative inflation, the higher its currency value will be, and long-run changes in the value of a nation's currency value depend mainly on the country's inflation rate relative to foreign nations. c. The higher a nation's relative inflation, the lower its currency value will be, and long-run changes in the value of a nation's currency value depend on the country's inflation rate relative to foreign nations. d. Changes in relative international money supplies are the major cause of short-run exchange rate movements, and long-term exchange rate changes depend mainly on interest parity relationships. e. None of the above
The market mechanism
A. Works because prices serve as a means of communication between consumers and producers. B. Works through central planning by government. C. Eliminates market failures created by government. D. Is not a very efficient means of communicating consumer demand to the producers of goods and services.