Which of the following is a drawback of a floating exchange-rate system?
A. Adverse foreign trade shocks are especially damaging since any intervention by the central bank adds to the recession.
B. Overshooting of exchange rates may cause excessive resource shifts into and out of trade-oriented industries.
C. Inflation is fully transmitted from one country having a higher rate of inflation to another one having a lower rate.
D. Monetary policy is ineffective in raising aggregate demand since it cannot be directed toward achieving internal balance.
Answer: B
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Refer to Figure a. Charlie and Joe both want to ride shotgun with their mother, so they play a game of rock-paper-scissors to determine who gets to sit in the front seat. In the table, -1 represents a loss, 1 a win and 0 a tie, and Joe's payoff is shown in the upper left-hand corner of each cell, while Charlie's appears in the lower right-hand corner. If Charlie knows Joe always throws scissors, what is Charlie's best response?
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A. Rock
B. Paper
C. Scissors
D. The answer cannot be determined from the information given.
Pair-wise majority voting eliminates which problem?
A. Majority options problem B. Swing-vote problem C. Misalignment problem D. Third party problem
One way the government can boost the economy out of a recession is:
A. with public announcements telling the public to save their money. B. by increasing government spending. C. by setting price ceilings on most goods so people can afford them. D. None of these will help an economy in recession.
GDP excludes expenditures by:
A. businesses on pollution control equipment. B. business for travel and entertainment. C. consumers on used automobiles. D. government on military hardware.