To maintain a functioning gold standard:
A) nations are obliged to exchange any amount of issued paper money for gold.
B) paper money is not allowed; all transactions must be in coins or gold.
C) the monetary authority cannot exchange currency for gold.
D) care must be taken to keep inflation under 10%.
Ans: A) nations are obliged to exchange any amount of issued paper money for gold.
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The market for used cars is shown in the above figure. Buyers cannot tell whether any given car is a lemon. Forty percent (40%) of all cars are lemons. However, sellers can switch to selling lemons at lower costs
Which of the following statements is TRUE? A) Only lemons are sold for $1,600. B) Only lemons are sold for $800. C) All the sellers of good cars will switch to selling lemons. D) 40% buyers will get lemons.
In an economic model, assumptions
A) must be applicable to all real-world situations. B) must be eliminated before being used to make sure the model is realistic. C) are not important in determining the usefulness of the model. D) define the set of circumstances in which the model is most likely to be applicable in the real world.