A liquidity trap occurs when
A) any additions to the monetary base are held as cash by people or reserves at banks.
B) the Fed increases the money supply, causing the expected inflation rate to rise more than the real interest rate declines, so that the nominal interest rate increases.
C) there are runs on banks that are solvent but illiquid.
D) the demand for loans increases in a country on the gold standard, so that the monetary supply is not able to increase and interest rates rise dramatically.
A
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If an increase in income leads to in an increase in the demand for peanut butter, then peanut butter is
A) a neutral good. B) a necessity. C) a normal good. D) a complement.
Describe the conditions under which a common resource is used efficiently
What will be an ideal response?
Refer to the above figure. A unit tax has been placed on the good. The producer pays what amount of the tax?
A) none of the tax B) P2 - P0 C) P2 - P1 D) P1 - P0
Arbitrage with two currencies is NOT possible when:
a. there is an exchange rate difference in two markets. b. traders are familiar with markets. c. the exchange rates are in equilibrium, and the same is occurring in all markets. d. the exchange rates are extremely volatile.