Monetary policy is more effective when:
A. the exchange rate is fixed.
B. the exchange rate is floating.
C. it is contractionary.
D. it is expansionary.
B. the exchange rate is floating.
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Which of the following best summarizes the essence of the Invisible Hand Theorem?
a. Competitive markets guarantee that any shortages or surpluses existing in an economy will be quickly eliminated. b. Of all the possible economic systems, competitive markets are the most philosophically compatible with democracy and freedom. c. Within competitive markets, people who selfishly pursue their own interests end up achieving a socially desirable outcome. d. The social gain created by competitive markets is second only to what a hypothetical benevolent dictator could achieve.
Which of the following is true for the economy depicted in Figure 9-2?
a. potential output equals y1 b. it would be impossible for this economy to achieve an output greater than y1 c. when output y1 is achieved, the actual rate of unemployment will exceed the natural rate of unemployment d. when output y1 is achieved, the actual rate of unemployment will be less than the natural rate of unemployment
Mutual interdependence implies that
a. all other firms in a monopolistically competitive industry rely on one firm to take leadership in setting price b. monopolistically competitive firms will "follower the leader" allowing the monopoly firm to determine price c. each firm within an oligopoly is affected by what the other firms in the industry do d. all firms in the industry are independent of each other e. all firms in the industry must agree before any price changes occur
In the short run, an increase in the price level induces firms to expand production because
A. higher prices allow firms to hire more inputs by offering higher prices for inputs, which increases productivity and profits. B. prices of inputs are held constant, so the higher prices for firms' products imply that it is profitable to expand production. C. each firm must keep its production level up to the level of its rivals, and some firms will expand production as the price level increases. D. they can increase profits by increasing maintenance costs.