The self-correcting property of the economy means that output gaps are eventually eliminated by:
A. increasing or decreasing potential output.
B. government policy.
C. decreasing inflation only.
D. increasing or decreasing inflation.
Answer: D
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The above figure shows the marginal private cost curve, marginal social cost curve, and marginal social benefit curve for cod, a common resource. A quota to prevent the overuse of the cod sets the catch equal to ________
A) 0 tons per week B) 300 tons per week C) 400 tons per week D) None of the above answers is correct.
The process by which individuals limit their productive efforts to a particular activity instead of trying to produce directly everything that they need is known as
a. specialization. b. using absolute advantage. c. using exchange. d. scarcity.
Suppose the current exchange rate between the Japanese yen and the U.S. dollar is 80 yen = $1. Suppose you can buy more goods in the United States with $10 than you can in Japan with 800 yen. Japan's GDP in dollars will be
A) greater if the current exchange rate, rather than the purchasing power parity exchange rate, is used to convert yen to dollars. B) less if the current exchange rate, rather than the purchasing power parity exchange rate, is used to convert yen to dollars. C) the same whether the current exchange rate or the purchasing power parity exchange rate is used to convert yen to dollars. D) more accurate if the current exchange rate, rather than the purchasing power parity exchange rate, is used to convert yen to dollars.
The interest rate in the federal funds market:
a. is determined by the imposition of price controls imposed by the Fed. b. rises when the quantity of funds demanded by banks seeking additional reserves exceeds the quantity supplied by banks with excess reserves. c. will fall if the Fed sells bonds and, thereby, reduces the reserves available to banks. d. is an interest rate that is largely unaffected by the policies of the Fed.