Suppose that there is a negative aggregate supply shock and the central bank commits to an inflation rate target. A) If the commitment is credible, the public’s expected inflation will remain unchanged. B) Credible policy produces better outcomes on both inflation and output in the short run. C) Policies that are not credible produce worse […]
Which of the following is the best example of a monopolistically competitive market? A) The wheat market. B) The electricity market. C) The restaurant market. D) The market for automobiles. ANSWER C
Complete the table below, which represents the production costs for a typical firm. (Round numbers to the nearest tenth.) TP TFC TVC TC AFC AVC ATC MC 0 $20 $ 0 $__ — — — — 1 ___ 27.5 ___ $__ $__ $__ $27.5 2 ___ 46.8 ___ ___ 23.4 ___ ___ 3 ___ 63.3 […]
Approaches to establishing central bank credibility include A) continued success at keeping inflation under control. B) central bank independence. C) appointment of a more conservative central banker. D) all of the above. ANSWER D
The process where financial intermediaries create and sell low-risk assets and use the proceeds to purchase riskier assets is known as A) risk sharing. B) risk aversion. C) risk neutrality. D) risk selling. ANSWER A
The amount of deposits that banks must hold in reserve is A) excess reserves. B) required reserves. C) total reserves. D) vault cash. ANSWER B
Microsoft enjoyed the benefit of several barriers to entry, including all of the following except: A) lock in and switching costs. B) patents and copyright protection. C) input barriers. D) network externalities. ANSWER C
If a forecast made using all available information is NOT perfectly accurate, then it is A) still a rational expectation. B) not a rational expectation. C) an adaptive expectation. D) a second-best expectation. ANSWER A
The U.S. government can play an important role in establishing the credibility of anti-inflation policy by A) demonstrating fiscal responsibility. B) monitoring the Fed. C) conducting fiscal policy. D) all of the above. ANSWER A
Use the following table to answer questions a-c. Output (Q): 0 1 2 3 4 5 6 Total Cost (TC): $36 $45 $52 $61 $74 $91 $110 a. What is the average fixed cost of producing 4 units of output? b. What is the marginal cost of producing the third unit of output? c. At […]
