The sale of government securities by the Fed leads to
A) a decrease in bank reserves.
B) a contraction in bank lending.
C) a decrease in the monetary base.
D) All of the above answers are correct.
D
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The major criticism of the view that expectations are formed adaptively is that
A) this view ignores that people use more information than just past data to form their expectations. B) it is easier to model adaptive expectations than it is to model rational expectations. C) adaptive expectations models have no predictive power. D) people are irrational and therefore never learn from past mistakes.
Kari lives in a country where economic growth has been flat for the past eight years, but the population has increased by 2 percent over this same period. What has most likely happened in Kari’s country?
a. Wages have declined by 2 percent. b. The standard of living has declined. c. The GDP per capita has increased. d. The nation’s production of goods has increased steadily.