Fiat money has value because it
A. is backed by gold.
B. can be used to buy goods and services.
C. can be exchanged for precious metals at a fixed price.
D. can be divided into smaller units.
E. All of these responses are correct.
Answer: B
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If the output gap equals -200 billion, then:
A. potential GDP is lower than actual GDP. B. there is no cyclical unemployment. C. cyclical unemployment equals the sum of structural and frictional unemployment. D. there is a recessionary gap.
If a monopolist's production process has economies of scale and average cost exceeds marginal cost, then
A) the government could set price equal to marginal cost and subsidize the monopoly. B) the government should not offer a subsidy, since the monopoly can make a profit setting price equal to marginal costs. C) if the government sets price equal to average cost, the monopoly will go out of business. D) the government cannot regulate price.
Because of automatic stabilizers, disposable income varies proportionately less than real GDP during periods of economic fluctuations
a. True b. False Indicate whether the statement is true or false
A decrease in the price level leads to which of the following sequences?
a. The money demand curve shifts leftward, the interest rate drops, the aggregate expenditure line shifts upward, and there is movement downward along the aggregate demand curve. b. The money demand curve shifts rightward, the interest rate increases, the aggregate expenditure line shifts downward, and there is movement upward along the aggregate demand curve. c. The money demand curve shifts leftward, the interest rate drops, the aggregate expenditure line shifts downward, and there is movement upward along the aggregate demand curve. d. The money demand curve shifts rightward, the interest rate increases, the aggregate expenditure line shifts upward, and there is movement downward along the aggregate demand curve. e. The money demand curve shifts leftward, the interest rate drops, the aggregate expenditure line shifts upward, and there is movement upward along the aggregate demand curve.