When there is a recessionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; decline
B. increase; raise; decline
C. decline; lower; expand
D. decline; raise; decline
Answer: C
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Somebody steals silverware from the dinner table at a nice restaurant
You question them and they justify their behavior by saying, "The restaurant management knows customers steal–they raise the price of their meals and drinks to cover the additional costs of stolen items. Since they pass on the higher costs to all of us who haven't stolen, I think it is only fair I finally get my share of the silverware." The economist would view the above statement as: A) incorrect, because even though people stole silverware, it doesn't make it any more profitable to raise prices. B) correct, because what's fair is fair. C) correct, because economics champions such selfish behavior. D) an ethical problem, and it has nothing to do with economics.
All of the following would be considered a positive addition to household wealth except
A) the equity in one's home. B) the balance in your savings account. C) 500 shares of Google stock. D) a credit card balance.
Suppose that Fiona spends all of her income on 10 units of good X and 14 units of good Y. Fiona's marginal utility from the 10th unit of good X is 24 utils, and her marginal utility from the 14th unit of good Y is 20 utils. If the price of good X is $8 per unit and the price of good Y is $5 per unit, then to comply with the rational spending rule, Fiona should:
A. continue to purchase 10 units of good X and 14 units of good Y. B. purchase more than 10 units of good X and less than 14 units of Y. C. purchase less than 10 units of good X and more than 14 units of good Y. D. purchase more than 10 units of good X and more than 14 units of good Y.
Assuming the inner curve is the United States' current production possibilities frontier, points J, N and K represent
A. an inefficient use of resources.
B. an output that is not possible to produce.
C. points of unemployed resources.
D. points of fully employed resources.