Why is fiscal policy less effective in an open economy than in a closed economy?
A. Expansionary fiscal policy raises demand for imports, which reduces aggregate demand.
B. Expansionary fiscal policy raises interest rates, which raises the value of the currency, and reduces aggregate demand.
C. Expansionary fiscal policy raises the value of the currency, which reduces demand for exports.
D. Expansionary fiscal policy has all the above effects.
Answer: D
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If the Fed wished to decrease inflation, it could
A) increase the reserve requirement or conduct an open market sale. B) increase the reserve requirement or conduct an open market purchase. C) decrease the reserve requirement or conduct an open market sale. D) decrease the reserve requirement or conduct an open market purchase.
Why do insurance companies often find it necessary to purchase re insurance?
What will be an ideal response?
If the unemployment rate is 13%, then the employment rate is
A. 13%. B. 87%. C. 113%. D. unknown based on the information given.
The profits of business firms, defined as the difference between total revenue and total cost, are not zero because
A) capitalists have a near monopoly over the means of production. B) information is a scarce good. C) the government defines some opportunity costs as revenue in order to increase tax receipts. D) there would be no investment if firms did not earn positive profits.