If Ed is willing to pay a maximum of $200 for a tweed sport coat but buys one for $180, that $20 saved is
a. his reservation price
b. the store's producer surplus
c. his total expenditure
d. his marginal utility
e. his consumer surplus
E
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The balance of payments constraint refers to the limits on:
A. exchange rate policy imposed by flexible exchange rates. B. currency convertibility observed in most developing countries. C. domestic macroeconomic policy, arising from a shortage of international reserves. D. macroeconomic policy resulting from IMF conditionality.
In which of the following situations would the Fed conduct contractionary monetary policy?
A) The Fed believes that aggregate demand was growing too slowly to keep up with potential GDP. B) The Fed fears that unemployment is climbing above the natural rate. C) The Fed is concerned that aggregate demand would continue to exceed the growth in potential GDP. D) The Fed is worried that deflation will become a problem.
A supply factor in economic growth would be:
What will be an ideal response?
In the above figure, suppose the economy is at a short-run equilibrium at point B and the interest rate is r2. Which of the following policy options for the Fed will help solve the short-run situation?
A) open market sale of government securities B) lowering the required reserve ratio C) lowering the differential between the discount rate and the federal funds rate D) open market purchase of government securities