According to the purchasing-power parity theory, differences in domestic inflation rates are a major cause of exchange rate movements.
Answer the following statement true (T) or false (F)
True
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Assume that Joe is willing to produce a hamburger for $1, and Mary is willing to pay $3 for a hamburger. Which of the following is true?
A. Joe and Mary cannot make a mutually beneficial exchange. B. Joe and Mary will only trade if the equilibrium price is less than $1. C. Joe and Mary can make a mutually beneficial exchange. D. Joe and Mary will not trade in equilibrium.
If demand for a seller’s product is elastic, a price increase will decrease total revenue.
Answer the following statement true (T) or false (F)
The term "fiscal federalism" refers to
a. deficit financing of government programs. b. the power of Congress to tax and to determine how tax revenues are spent. c. transferring money between levels of government (for example, from a state government to a local government). d. the system under which governments ask citizens to vote on major revenue-raising measures (for example, on issues of municipal bonds).
Consider a $2 billion open market purchase of U.S. Treasury securities by the Federal Reserve. The Banking System's balance sheet will specifically show:
A. no net change in assets or liabilities, only a change in the composition of assets with securities increasing and reserves decreasing by $2 billion respectively. B. only an increase in liabilities of $2 billion. C. only a decrease in assets of $2 billion. D. no net change in assets or liabilities, only a change in the composition of assets with securities decreasing and reserves increasing by $2 billion respectively.