Richard receives government transfer payments and currently consumes 5 guns and 6 goose livers. Assume the price of guns decreases by 10% and the price of goose liver increases by 20%
The government raises Richard's transfer payments so he can still afford 5 guns and 6 goose livers. Does this constitute a true cost-of-living adjustment (COLA)? A) No. Richard is overcompensated.
B) No. Richard is undercompensated.
C) Yes. The payment just achieves the right level of compensation.
D) Not enough information.
A
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Use the following graph for a competitive market to answer the question below.
A black market where the price is $2.00 could result from a price
A. ceiling set at $2.50. B. floor set at $2.00. C. floor set at $1.50. D. ceiling set at $1.50.
The production possibilities frontier itself illustrates
A) all goods that can be produced by an economy. B) the combination of goods and services that can be produced efficiently. C) all goods and services that are desired but cannot be produced due to scarce resources. D) all possible production of capital goods.
If the Fed’s monetary policy causes a substantial increase in interest rates, what is the most likely impact on velocity?
A. Velocity will decrease. B. Velocity will increase. C. Velocity will remain constant. D. Velocity is unrelated to interest rates.
If the Fed wanted to shift to a restrictive monetary policy and reduce the money supply, it could
a. decrease the reserve requirements imposed on commercial banks. b. purchase U.S. government securities and other financial assets in the open market. c. decrease the interest rate on loans extended to banks and other financial institutions. d. increase the interest rate paid on excess reserves encouraging banks to hold excess reserves rather than extend more loans.