ECO561 Economics
University of Phoenix
ECO561
Week 1 Influence of Economics on Household Decision Making
Purpose of
Assignment
To locate,
retrieve, and evaluate the effects of macroeconomic indicators on your own
decision making.
Assignment
Steps
Resources: Tutorial help on Excel® and Word
functions can be found on the Microsoft® Office website. There are
also additional tutorials via the web offering support for Office products.
Scenario: Consider your last big purchase such as a car,
appliances, home repairs, home purchase, computer equipment, college tuition,
or another “big-ticket” item, which are often purchased using loans/financing
(by borrowing money). Also consider your decision-making process that led you
to choose a particular make, model, or brand of the product (or service) you
purchased and whether it was the right time to make the purchase given economic
conditions at the time of your purchase. While analyzing your decision, keep in
mind everything from interest rates to the prices of complementary and
substitute goods are driven by human economic behavior.
Develop a minimum 1,050-word analysis of your
decision-making process in which you include the following:
- Retrieve
statistics on Real Gross Domestic Product (GDP) and on Real Personal
Consumption Expenditures (PCE) by year for the last ten years. You can
retrieve those statistics from internet sources including, but not limited
to, the Federal Reserve of St. Louis's FRED web site, the U.S. Department
of Commerce's Bureau of Economic Analysis (BEA) web site, or another
credible source of your choice. Post these statistics in a single
worksheet of an Excel® workbook and submit your Excel®
file with your report. In your report, discuss the latest 10-year trends
in both GDP and PCE. Also discuss how the trends in GDP compare with
trends in PCE. You are encouraged to include graphs of these statistics in
your report; you could create the graphs in Excel® and copy
them into your report.
- Retrieve
statistics on the Effective Federal Funds Rate and on the Consumer Price
Index: All Items Less Food and Energy by year for the last 30 years. You
can retrieve those statistics from internet sources including, but not
limited to, the Federal Reserve of St. Louis's FRED web site, the U.S.
Department of Labor's Bureau of Labor Statistics (BLS) web site, or other
credible sources of your choice. Post these statistics in a single
worksheet of an Excel® workbook and submit your Excel®
file with your report. In your report, discuss how the trends in the
Effective Federal Funds Rate compare with trends in inflation. If you took
out a loan to pay for your “big-ticket” purchase, what was the interest
rate on your loan? Were interest rates rising or falling at that
time? Were interest rates relatively high or low at that time? You
are also encouraged to include graphs of these statistics in your report.
- Discuss
the influence of any Federal government or state government programs, such
as tax credits or tax deductions for energy-saving/efficiency purchases,
on your decision to make your last big purchase; or if government
incentives did not factor into your decision, explain why not.
- Develop
conclusions about the economy's influence on personal and business
decision-making relative to purchases of big-ticket items, investments, or
other major purchases.
Cite a minimum of three peer-reviewed sources. Note:
The Federal Reserve of St. Louis, the Bureau of Economic Analysis, and the
Bureau of Labor Statistics can be cited to fulfill this requirement.
ECO561
Week-2 Government Interventions vs. Market Based Solutions
Purpose
of Assignment
The
theory of market economies emphasizes freedom of choice and limited government
intervention. The classic argument for government intervention is market
failure – the inability of the market economy to correct itself from a
dysfunctional state (such as the Great Depression). Students will examine
articles from the University library to analyze real-world examples of U.S.
government intervention programs and apply current week readings to make
intelligent conclusions about the economic policies.
Assignment
Steps
Resources: Tutorial help on Excel®
and Word functions can be found on the Microsoft® Office website.
There are also additional tutorials via the web offering support for Office
products.
Using the
University Library, EBSCOhost, or ProQuest data bases, locate up to three
different articles/publications and/or use The Economist Online from the
University Library to examine one case of significant government intervention
as it relates to your current industry of employment or an industry in which you
are interested in working. You may access EBSCOhost, ProQuest or The Economist
Online through the University Library homepage:
- Click on the Library
tab.
- Click on University Library.
- Click on the tab to
Databases A-Z.
- Click on “E”.
- Scroll down to Economist.com.
Examples
of intervention programs you may select, but are not limited to:
- US agriculture support
programs
- Low income support programs
(Food Stamps, Earned Income Tax Credit, Child Tax Credit, and Temporary
Assistance to Needy Families)
- Medicaid, Children's Health
Insurance Program, The Affordable Care Act (Obamacare)
- Low-income rent controls and
housing vouchers
- Government promotion of
renewable energy sources to discourage use of fossil fuels such as coal
and oil
- Unemployment Insurance
- Bailout of U.S. banks and
other financial institutions during the Great Recession
- Bailout of U.S. auto makers
during the Great Recession
- Social Security retirement
benefits
Develop a minimum 10-slide Microsoft®
PowerPoint® presentation including detailed speaker notes or
voiceover including the following:
- Describe the intervention
and detail its history.
- Analyze the arguments for
government intervention as opposed to arguments for market-based
solutions. Hint: See the information in our course textbook on
market failures.
- Examine who may be helped
and who may be hurt by the selected government intervention.
- Examine externalities and/or
unintended consequences of such intervention.
- Determine the cost trend of
the intervention program since its implementation including whether costs
are increasing, decreasing, or vary with the state of the economy.
- Evaluate the success or
failure of the intervention in achieving its objectives and develop
conclusions.
- Recommend whether the
program should be continued as is, discontinued, or modified and defend
your recommendation.
Note: The use of tables and/or charts
to display economic data over the time period discussed is highly encouraged.
However, if your source includes the copyright symbol, which looks like this:
©, then you should not copy any table and/or charts from that source. You could
use, but are not required to use, charts/graphs retrieved from the Federal
Reserve Bank of St. Louis FRED web site as long as the data sources used by
FRED to create those charts are government sources such as the Bureau of
Economic Analysis or the Bureau of Labor Statistics.
Cite a minimum of three scholarly,
peer-reviewed references.
ECO561
Week 3 Research Analysis for Business
Purpose of Assignment
The purpose of this
assignment is the creation of a research analysis. Every day, consumers make
millions of decisions that impact the marketplace and influence firms'
decisions. Firms use economic concepts, models, and other “tools” of economics
to help determine pricing, output, and profit maximization. As an MBA student
of economics, you can apply the “tools” of economics to microeconomic and
macroeconomic data to create recommendations for how firms can maximize
revenue, profit and market share.
Assignment Steps
Resources: Tutorial help on Excel® and Word functions can be found on
the Microsoft® Office website. There are also additional tutorials
via the web offering support for Office products.
Scenario: Imagine you are a business consultant to a firm of your choice. You have
been asked to analyze, advise, and create recommendations on how the firm can
ensure its future success in its current market.
Work with your instructor to choose a firm that matches the following
criteria: a publicly-traded company operating in the U.S. market. Note:
A publicly-traded company is a private-sector firm owned by its
shareholders/stock holders.
Prepare a minimum 1,050-word analysis of economic data and business data to
explain how the core economic principles impact the sustainability of the firm
and what actions the firm can take to ensure success.
Address the following:
- Identify the
market structure your chosen firm operates in, analyze your chosen firm's
current market share, and identify the firm's local/global competitors.
Analyze the barriers to entry in this market to illustrate the potential
for new competition and its impact on your firm's future in the market. Hints:
Be sure you review the barriers to entry discussed in the course text.
You might consider presenting the data graphically.
- Identify and
explain trends in current macroeconomic indicators for last three years
including:
- Current stage of
the business cycle.
- Real gross
domestic product (GDP).
- Inflation as
measured by the consumer price index (CPI).
- Unemployment
rate.
- Federal funds
rate.
- Current rate for
borrowing funds such as the so-called “prime rate.” Note: A
requirement of the Week 1 Influence of Economics on Household Decision
Making report was to gather data on the CPI, GDP, and interest rates, so
you should consider reviewing the feedback you received on the Week 1
report.
- Evaluate trends
in demand over last three years and explain their impact on the industry
and the firm. Include quarterly (last two quarters) and annual sales (last
three years) figures for the product your firm sells. Create business
strategies by analyzing information and data related to the demand for and
supply of your firm's product(s) to support your recommendation for the
firm's actions. Remember to include a graphical representation of the data
and information used in your analysis.
- Examine
available, current data and information, such as pricing and the
availability of substitutes, and explain how you could determine the price
elasticity of demand for your firm's product. Assess how the price
elasticity of demand impacts the firm's pricing decisions and revenue
growth.
- Apply the
concepts of variable and fixed costs to your firm for informing its output
decisions. For instance, analyze how different kinds of costs (labor,
research and development, raw materials) affect the firm's level of
output.
- Based on the data
gathered and analysis performed for this report write a conclusion in
which you:
- Create business
strategies, including price and non-price strategies, based on your
market structure to ensure the market share and potential market
expansions and explore global opportunities for your business in a
dynamic business environment and provide recommendations.
- Develop a
recommendation for how the firm can manage its future production by
synthesizing the macroeconomic and microeconomic data presented.
- Propose how the
firm's position within the market and among its competitors will allow it
to take your recommended action.
- Recommend
strategies for the firm to sustain its success going forward by
evaluating the findings from demand trends, price elasticity, current
stage of the business cycle, and government policies.
Cite a minimum of three peer-reviewed references and a minimum of two government
economic data sources/references.
ECO561
Week 4 Inflation and Analyses of Monetary Policies
Purpose of
Assignment
This
assignment will introduce students to the U.S. Department of Labor's Bureau of
Labor Statistics (BLS) data and provide students with the skills to calculate
inflation and interpret the Consumer Price Index (CPI). Note: The BLS is
the primary source of information on inflation, but their data is re-posted in
other sources, such as the St. Louis Federal Reserve FRED site, among others.
Assignment
Steps
Resources:
Tutorial help on Excel® and
Word functions can be found on the Microsoft® Office website. There
are also additional tutorials via the web offering support for Office products.
Use an internet search or the University Library to
locate information on the Consumer Price Index (CPI). Internet sites you might
find useful include the Bureau of Labor Statistics (BLS) and the Federal
Reserve of St. Louis FRED web site although you are allowed to use other
sources.
Develop a minimum 700-word analysis of inflation by
including the following:
- Choose
a product or service you currently consume/use, such as apparel or educational
services, that is included in the CPI's “market basket.” Find the
annual CPI index numbers for your chosen good or service for the years
1995, 2005, 2010, and 2015. Enter those index numbers in an Excel® file
and calculate the percent change (inflation rates) in those index numbers
from 1995 to 2005, from 1995 to 2010, and from 1995 to 2015.
- Analyze
the trends in overall inflation over the last five years and whether your
income has kept pace with inflation. How has inflation over the last
five years affected you and/or your family?
- Discuss
how a business manager, such as a human resources manager, might use CPI
statistics.
Cite a minimum of three scholarly, peer-reviewed
references.
ECO561
Week 5 Effectiveness of the Counter-Cyclical Policies
Purpose of Assignment
This
assignment addresses how both monetary and fiscal policies have been used
during the so-called Great Recession, which began in December 2007 and ended in
June 2009, to the present to moderate the business cycle.
Assignment
Steps
Resources: Tutorial help on Excel® and
Word functions can be found on the Microsoft® Office website.
There are also additional tutorials via the web offering support for Office
products.
Create a minimum 10-slide PowerPoint®
presentation, including detailed speaker notes or voiceover, in which you
analyze your choice of one the following markets or industries:
- The housing market
- Financial markets
- Commodity and stock markets
- An industry of your choice,
such as the automobile industry, the airline industry, retail trade, or
any other major industry that suffered heavy losses during the Great
Recession
Your
analysis will extend from the beginning of the Great Recession, which was
December 2007, to the present and should include the following:
- An Excel® workbook
with the following datasets:
- One dataset related to the
U.S. housing industry such as housing starts, the FHFA housing price
index, or another dataset of your choice related to the housing market.
- One dataset related to
personal or household income or to personal or household saving.
- One dataset related to the
labor market such as the unemployment rate, initial claims for
unemployment insurance, or another dataset of your choice related to the
U.S. labor force.
- One dataset related to
production and business activity within the market or industry you choose
to analyze.
- Find your datasets by using
different internet data sources, including, but not limited to, the
Federal Reserve Bank of St. Louis's FRED site, U.S. Dept. of Commerce's
Bureau of Economic Analysis (BEA), U.S. Dept. of Labor's Bureau of Labor
Statistics, U.S. Census Bureau, and The Organization for Economic
Co-operation and Development (OECD). Using data results analyze the
economic and sociological forces that drove the market equilibrium to
unsustainable heights, commonly referred to as “bubbles,” and the shocks
that brought the markets back down.
- Discuss specific changes in
supply and demand within the markets and/or industries you chose to
analyze.
- Examine prior government
policies and legislation that might have exacerbated the impact of the
shocks. Also, discuss government actions/regulations that might be
undertaken, and/or have been undertaken, to moderate the effects of
extreme economic fluctuations.
- Evaluate the actions of the
federal government (fiscal policy) and the Federal Reserve (monetary
policy) to restore the economy and foster economic growth. Base your
evaluation on information available at Internet sources such as, but not
limited to, the Fed's The Economy Crisis and Response website
as well as other appropriate sources found on the Internet and in the
University Library. Be sure you address the effectiveness of those
counter-cyclical policies.
Cite a minimum of three
peer-reviewed sources and economic data not including the course text. Submit
the data results in a separate Microsoft® Excel® file.
ECO561
CHALLENGES OF EXPANSION TO A FOREIGN LOCATION
Discuss the evidence that supports your recommendations.
Select a foreign market in which to expand your chosen product.
Write a 1,750-word paper (including any material you include from
your paper on Market Structure and Pricing Power assignment) detailing
your findings. The use of tables and/or charts to display economic data over
the time period discussed is highly encouraged.
· Evaluate current
global economic conditions and their effect on local macroeconomic indicators
in your selected country. Consider forecasts for population growth, GDP
growth, GDP per capita growth, export growth, and sales growth.
· Differentiate the
competitors' existing production in the chosen country.
· Assess forecast sales
in the selected country.
· Prioritize the type
of economy that exists in your selected country-closed, mixed, or market.
What is the difference between these types of economies and how might this
affect your expansion?
· Justify how your
chosen country's current credit market conditions affect demand for your
product or service and your planning or operating decision for your production
in that country.
· Analyze the role of
the selected country's central bank on that country's economy.
· Compare the
availability, education, and job skills of the work force in the selected
country. Discuss the additional challenges of international production, such as
political stability, availability of government financing or other incentives,
threat of capital controls, and exchange rate risks.
· Explain any
additional supply chain challenges you anticipate if attempting to sell your
product made in your chosen country to countries outside of that market.
· Recommend any
comparative advantages your company will have over competitors in that country.
· Defend your position,
either for or against, expanding your company's production into your chosen
country based on your research.
Cite a minimum of three peer reviewed sources not including the textbook.
Foreign Market: India. Product: iPhone
ECO561
Week 6 Signature Assignment Challenges of Expansion to a Foreign Location
Purpose of
Assignment
This week students
will review and revise their Week 3 Research Analysis for Business
Signature Assignment based on economic analysis and the feedback provided by
their facilitator. Students will also expand their Week 3 analyses to evaluate
the challenges of expanding their chosen company's production to a foreign
market.
About Your Signature
Assignment
This signature
assignment is designed to align with specific program student learning
outcome(s) in your program. Program Student Learning Outcomes are broad
statements that describe what students should know and be able to do upon
completion of their degree. The signature assignments might be graded with an
automated rubric that allows the University to collect data that can be
aggregated across a location or college/school and used for program
improvements.
Assignment Steps
Resources: Tutorial help on Excel® and Word functions can be found on
the Microsoft® Office website. There are also additional tutorials
via the web offering support for Office products.
Revise your Week 3 assignment, Research Analysis for Business, using the
feedback provided by your facilitator. This Week 6 report should only include one
conclusion, so you will need to rewrite the conclusion you included in your
Week 3 assignment, Research Analysis for Business.
Select a foreign market in which to expand your chosen product. If you wish,
you may use one of the countries your team analyzed in their Week 5 Comparative
and Absolute Advantage Assignment.
Prepare a minimum1,750-word report addressing the points listed below. The use
of tables and/or charts to display economic data over the time period discussed
is highly encouraged, you may submit any economic data in Microsoft®
Excel® format in a separate file. You may use the U.S. Department of
Labor's Bureau of Labor Statistics (BLS), U.S. Dept. of Commerce's Bureau of
Economic Analysis (BEA), the Federal Reserve of St. Louis's FRED data, the CIA
World Fact Book, World Bank data, and World Trade Organization, or other
appropriate sources you might find on the Internet or in the University
Library. The new sections of your report should:
- Evaluate current
global economic conditions and their effects on macroeconomic indicators
in your selected country. Provide forecasts for population growth,
gross domestic product (GDP) growth, GDP per capita growth, export growth,
and sales growth.
- Evaluate any
competitors' existing production in the chosen country.
- Assess sales
forecasts in the selected country by using the Federal Reserve of St.
Louis's FRED data, the CIA World Fact Book, World Bank data, World Trade
Organization, or other appropriate sources you might find on the Internet
or in the University Library.
- Categorize the
type of economy that exists in your selected country as closed, mixed, or
market. What is the difference between these types of economies and
how might this affect your expansion?
- Assess how your
chosen country's current credit market conditions, especially interest
rates and the availability of financing, affect demand for your product or
service and your planning or operating decision for your production in
that country.
- Analyze the role
of the selected country's central bank on that country's economy.
- Compare the
availability, education, and job skills of the work force in the selected
country. Discuss any additional challenges of international production,
such as political stability, availability of government financing or other
incentives, threat of capital controls, and exchange rate risks.
- Explain any
additional supply chain challenges you anticipate if attempting to make
your product in your chosen country and selling the product in other
countries.
- Based on the data
gathered and analysis performed for this report write a conclusion in
which you:
- Create business
strategies, including price and non-price strategies, based on your
market structure to ensure the market share and potential market
expansions and explore global opportunities for your business in a
dynamic business environment and provide recommendations.
- Develop a
recommendation for how the firm can manage its future production by
synthesizing the macroeconomic and microeconomic data presented.
- Propose how the
firm's position within the market and among its competitors will allow it
to take your recommended action.
- Recommend
strategies for the firm to sustain its success going forward by
evaluating the findings from demand trends, price elasticity, current
stage of the business cycle, and government.
- Recommend any
comparative advantages your company will have over competitors currently
operating in that country, and defend your position, either for or
against, expanding your company's production into your chosen country
based on your research.
Integrate with the Week 3 Individual Assignment, and incorporate corrections and
suggestions from the instructor's feedback. The final report should be a
minimum of 2,800 words.
Cite a minimum of three peer reviewed sources not including the textbook.
Include all peer-reviewed references and government economic data
sources/references from Week 3.
Format your assignment consistent with APA guidelines.
ECO561
Final Exam Score 97 PERCENT
QUESTIONS MAY BE IN DIFFERENT
ORDER.
Question 1
The fact that international specialization
and trade based on comparative advantage can increase world output is
demonstrated by the reality that:
the production
possibilities curves of any two nations are identical
a nation's
production possibilities line lies to the right of its trading possibilities
line
a
nation's trading possibilities line lies to the right of its production
possibilities line
a
nation's production possibilities and trading possibilities lines coincide
Question 2
The business cycle depicts:
the phases a
business goes through from when it first opens to when it finally closes
the evolution of
technology over time
short-run
fluctuations in output and employment (Probably wrong, not sure. Either
answer of question 1 is wrong or question2 is wrong)
fluctuations in the
general price level
3. Which of the following have
substantially equivalent effects on a nation's volume of exports and imports?
Exchange rate depreciation and
domestic inflation
Exchange rate depreciation and
domestic deflation
Exchange rate appreciation and
domestic deflation
Exchange rate appreciation and a
decrease in the domestic supply of money
4 If an unintended increase in
business inventories occurs at some level of GDP, then GDP:
may be either above or below the
equilibrium output
is too high for equilibrium
is too low for equilibrium
entails a rate of aggregate
expenditures in excess of the rate of aggregate production
5 Why are economists concerned
about inflation?
Inflation lowers the standard of
living for people whose income does not increase as fast as the price level
Inflation increases the value of
peoples' saving and encourages overspending on goods and services
Inflation generally causes
unemployment rates to rise
Real GDP is necessarily falling
when there is inflation
6 Contractionary fiscal policy is
so named because it:
involves a contraction of the
nation's money supply
is aimed at reducing aggregate
demand and thus achieving price stability
necessarily reduces the size of
government
is expressly designed to expand
real GDP
7 The term “recession” describes
a situation where:
government takes a less active
role in economic matters
output and living standards
decline
inflation rates exceed normal
levels
an economy's ability to produce
is destroyed
8 Which of the following
statements best describes the 12 Federal Reserve Banks?
They are privately owned and
publicly controlled central banks whose basic goal is to earn profits for their
owners.
They are privately owned and
publicly controlled central banks whose basic goal is to control the money
supply and interest rates in promoting the general economic welfare.
They are privately owned and
publicly controlled central banks whose basic function is to minimize the risks
in commercial banking in order to make it a reasonably profitable industry.
They are privately owned and
privately controlled central banks whose basic goal is to provide an ample and
orderly market for U.S. Treasury securities.
9 The primary gain from
international trade is:
tariff revenue
more goods than would be
attainable through domestic production alone
increased employment in the
domestic import sector
increased employment in the
domestic export sector
10 If the prices of all goods and
services rose, but the quantity produced remained unchanged, what would happen
to nominal and real GDP?
Nominal and real GDP would both
rise
Real GDP would rise, but nominal
GDP would be unchanged
Nominal GDP would rise, but real
GDP would be unchanged
Nominal and real GDP would both
be unchanged
11 Pure monopolists may obtain
economic profits in the long run because:
of rising average fixed costs
of barriers to entry
of advertising
marginal revenue is constant as
sales increase
12 Mrs. Arnold is spending all
her money income by buying bottles of soda and bags of pretzels in such amounts
that the marginal utility of the last bottle is 60 utils and the marginal
utility of the last bag is 30 utils. The prices of soda and pretzels are $.60
per bottle and $.40 per bag respectively. It can be concluded that:
the two commodities are
substitute goods
Mrs. Arnold should spend more on
soda and less on pretzels
Mrs. Arnold should spend more on pretzels
and less on soda
Mrs. Arnold is buying soda and
pretzels in the utility-maximizing amounts
13 Suppose you have a limited
money income and you are purchasing products A and B, whose prices happen to be
the same. To maximize your utility, you should purchase A and B in such amounts
that:
their marginal and total
utilities are proportionate
their marginal utilities are the
same
the income and substitution
effects associated with each are equal
their total utilities are the
same
14 Two major virtues of the
market system are that it:
eliminates discrimination and
minimizes environmental pollution
allocates resources efficiently
and allows economic freedom
results in price level stability
and a fair personal distribution of income
results in an equitable personal
distribution of income and always maintains full employment
15 Macroeconomics approaches the
study of economics from the viewpoint of:
the entire economy
governmental units
individual firms
the operation of specific product
and resource markets
16 Which of the following will
generate a demand for country X's currency in the foreign exchange market?
The imports of country X
Travel by citizens of country X
in other countries
The desire of foreigners to buy
stocks and bonds of firms in country X
Charitable contributions by
country X's citizens to citizens of developing nations
17 The simple circular flow model
shows that:
households are on the buying side
of both product and resource markets.
businesses are on the selling
side of both product and resource markets.
businesses are on the buying side
of the product market and on the selling side of the resource market.
households are on the selling
side of the resource market and on the buying side of the product market.
18 Countercyclical discretionary
fiscal policy calls for:
surpluses during both recessions
and periods of demand-pull inflation
surpluses during recessions and
deficits during periods of demand-pull inflation
deficits during recessions and
surpluses during periods of demand-pull inflation
deficits during both recessions
and periods of demand-pull inflation
19 If the Federal Reserve System
buys government securities from commercial banks and the public:
commercial bank reserves will
decline
the money supply will contract
it will be easier to obtain loans
at commercial banks
commercial bank reserves will be
unaffected
20 The two basic markets
shown by the simple circular flow model are:
product and resource
free and controlled
capital goods and consumer goods
household and business
21 All else equal, a large
decline in the real interest rate will shift the:
investment demand curve rightward
investment demand curve leftward
investment schedule downward
investment schedule upward
22 Normal profit is:
determined by subtracting
implicit costs from total revenue
the return to the entrepreneur
when economic profits are zero
the average profitability of an
industry over the preceding 10 years
determined by subtracting
explicit costs from total revenue
23 In the theory of comparative
advantage, a good should be produced in that nation where:
its absolute cost in terms of
real resources used is least
its cost is least in terms of
alternative goods that might otherwise be produced
the production possibilities line
lies further to the right than the trading possibilities line
its absolute money cost of
production is least
24 As output increases, total
variable cost:
increases continuously at a decreasing
rate
increases at a constant rate
increases more rapidly than does
total cost
increases at a decreasing rate
and then at an increasing rate
25 Assume the reserve ratio is 25
percent and Federal Reserve Banks buy $4 million of U.S. securities from the
public, which deposits this amount into checking accounts. As a result of these
transactions, the supply of money is:
directly increased by $4
million and the money-creating potential of the commercial banking system is
increased by $12 million.
directly increased by $4 million
and the money-creating potential of the commercial banking system is increased
by an additional $16 million.
not directly affected, but the
money-creating potential of the commercial banking system is increased by $12 million.
directly reduced by $4 million
and the money-creating potential of the commercial banking system is decreased
by an additional $12 million.
26 Buyers will opt out of markets
in which:
standardized products are being
produced
there are only foreign sellers
there are significant negative
externalities
there is inadequate information
about sellers and their products
27 In order for mutually
beneficial trade to occur between two otherwise isolated nations:
each nation must be able to
produce at least one good absolutely cheaper than the other
each nation must face constant
costs in the production of the good it exports
each nation must be able to
produce at least one good relatively cheaper than the other
one nation's production must be
labor-intensive while the other nation's production is capital-intensive
28 Research for industrially
advanced countries indicates that:
the more independent the central
bank, the higher the average annual rate of inflation
there is no relationship between
the degree of independence of a country's central bank and its inflation rate.
the more independent the central
bank, the higher the average annual rate of unemployment.
the more independent the central
bank, the lower the average annual rate of inflation
29 A monopolistically competitive
industry combines elements of both competition and monopoly. The monopoly
element results from:
the likelihood of collusion
mutual interdependence
high entry barriers
product differentiation
30 Because the federal government
typically provides disaster relief to farmers, many farmers do not buy crop
insurance even through it is federally subsidized. This illustrates:
the moral hazard problem
logrolling
the adverse selection problem
the special interest effect
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