Current Federal Reserve policy focuses on interest rates, rather than on monetary aggregates, because ________. A) monetary aggregates do not provide clear or consistent signals to guide policymakers B) open market operations affect interest rates more directly than they affect monetary aggregates C) according to the Fisher effect, the interest rate is a key determinant […]
Distorting taxes can invalidate Ricardian equivalence because A) they confuse consumers about the need for government to repay its debt. B) alternative ways of collecting the same tax revenue produce different amounts of lost welfare. C) they are inferior to lump-sum taxes. D) they are more popular, politically, than lump-sum taxes. ANSWER B
A good is inferior for a consumer if A) it is never included in his or her consumption bundle. B) its consumption rises when income rises. C) its consumption falls when income rises. D) some minimal level of the good must be consumed to assure the consumer’s survival. ANSWER C
The Ricardian equivalence implies that A) the level of government spending has no impact. B) the level of taxes has no impact. C) the distribution of government expenses though time has no impact. D) the distribution of taxes through time has no impact. ANSWER D
There is a double coincidence of wants when A) person 1 has what person 2 wants, who in turn wants what person 3 has. B) person 1 has what person 2 wants, and person 2 has money. C) person 1 has what person 2 wants, and person 2 has what person 1 wants. D) person […]
A consumer is said to be indifferent between two consumption bundles A) when the consumer doesn’t care about his or her consumption bundle. B) when the two bundles provide equal amounts of utility. C) when the consumer chooses the bundles equally often. D) when the consumer is indecisive. ANSWER B
M1 does not include cash that is held in ATMs or bank vaults, because ________. A) no one really owns that money B) that money is included in M2 C) that money earns no interest D) the right to access that money is counted already as bank deposits E) none of the above ANSWER […]
The Great Depression ________. A) was largely confined to the United States B) was largely confined to European markets C) was largely confined to Asian markets D) was worldwide in scope ANSWER D
A double coincidence of wants problem can be overcome by A) commodity money. B) fiat money. C) banks. D) all of the above. ANSWER D
Financial innovations such as direct deposit of paychecks, electronic payment of bills, and automated teller machines (ATMs) have likely ________. A) had minimal effect on M1 and M2 B) reduced the size of M2 relative to M1 C) increased both M1 and M2 relative to GDP D) caused the growth rates of M1 and M2 […]
