The last time gas prices increased drastically, sales of large Sport Utility Vehicles (SUVs) fell. Why?
A. Higher gas prices lowered the benefit of driving an SUV.
B. Higher gas prices increased the cost of driving a SUV.
C. Higher gas prices lowered the cost of driving a SUV.
D. Higher gas prices increased the benefit of driving an SUV.
Answer: B
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Adam Smith stated, "The man of system is apt to be very wise in his own conceit. He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board.". Which is true of this statement?
a. Keynes would tend to agree with the statement; Heyek would disagree with it. b. Keynes would tend to disagree with the statement; Hayek would agree with it. c. As the rap video indicates, both Keynes and Hayek strongly agree with this statement. d. As the rap video indicates, both Keynes and Hayek strongly disagree with this statement.
Assume that the central bank purchases government securities in the open market. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to the real risk-free interest rate and reserve-related (central bank) transactions in the context of the Three-Sector-Model?
a. The real risk-free interest rate falls, and reserve-related (central bank) transactions remain the same. b. The real risk-free interest rate falls, and reserve-related (central bank) transactions become more negative (or less positive). c. The real risk-free interest rate rises, and reserve-related (central bank) transactions remain the same. d. There is not enough information to determine what happens to these two macroeconomic variables. e. The real risk-free interest rate rises, and reserve-related (central bank) transactions become more positive (or less negative).