Proponents of using the inflation tax to finance government budget deficits argue that:
A. these deficits would be far worse otherwise.
B. the economic slowdown produced by the inflation tax is preferable to the hyperinflation that would occur in the absence of the inflation tax.
C. while inflation is undesirable, the breakdown of the economy that would occur in the absence of an inflation tax would be worse.
D. inflation is ultimately beneficial in the long run.
Answer: C
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When a market is not in equilibrium:
A. a change in either supply or demand is required to reestablish equilibrium. B. there is neither excess supply nor excess demand. C. the economic motives of sellers and buyers will move the market to its equilibrium. D. government intervention is required to achieve equilibrium.
The U.S. economy is experiencing falling output, falling employment, falling incomes and rising unemployment. These conditions best describe a business cycle
A) expansion. B) peak. C) trend. D) recession. E) trough.
Consider the following regression model: yi= 
0+ 1xi + ui. If the first four Gauss-Markov assumptions hold true, and the error term contains heteroskedasticity, then _____.
A. Var(ui|xi) = 0
B. Var(ui|xi) = 1
C. Var(ui|xi) = 
i2
D. Var(ui|xi) = 
(Figure: Technological Progress and Productivity Growth) Look at the figure Technological Progress and Productivity Growth. Which of the following changes in real GDP is most likely to have resulted from an increase in domestic savings?
What will be an ideal response?