When the government raises revenue by printing money, it imposes an "inflation tax" because the:
A. real value of money holdings falls.
B. interest rate falls.
C. difference between nominal and real interest rates becomes smaller.
D. nominal value of money holdings falls.
Ans: A. real value of money holdings falls.
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The domestic currency price of a representative foreign expenditure basket is
A) P, the domestic price level. B) E, the nominal exchange rate. C) P times E, the domestic price level times the domestic price level. D) P , the foreign price level. E) P times E, the foreign price level times the nominal exchange rate.
In a setting of repeated competition:
A. the cooperative outcome is the repetition in each period of the Nash equilibrium outcome that would arise were the firms to compete just once. B. the non-cooperative outcome is the repetition in each period of the Nash equilibrium outcome that would arise were the firms to compete just once. C. the non-cooperative outcome is the Nash equilibrium that arises only after firms compete many times. D. the cooperative outcome is the Nash equilibrium that arises after firms compete many times.
If a business firm is not operating at the point where MR = MC, then:
a. it should shut down. b. it will incur losses. c. it cannot be earning a profit. d. its profit is zero. e. it is not earning the maximum potential profit.
Quantify the cost savings associated with a cost-effective abatement allocation achieved through trading.
Suppose two point sources are discharging phosphorus into Wisconsin’sFox River and face the following abatement costs for this pollutant: Point Source 1: TAC1 = 500 + 0.35(A1)2 MAC1 = 0.7A1 Point Source 2: TAC2 = 750 + 1.05(A2)2 MAC2 = 2.1A2, where A1 and A2 represent the abatement of phosphorus effluents in pounds by Source 1 and Source 2, respectively, and TAC and MAC are measured in hundreds of dollars. Assume that the state environmental authority has set the total maximum daily load (TMDL) for the Fox River. To achieve this limit, 40 pounds of phosphorus must be abated across the two point sources. Use this information to answer the following questions.