When economic profit is positive,
A. the firm's owners experience a decrease in their wealth.
B. total revenue exceeds total economic cost.
C. the firm's owners have successfully solved the principle-agent problem.
D. foreign companies experience loss of market share
Answer: B
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Which of the following does NOT describe why Britain adopted the pegged system (the Exchange Rate Mechanism [ERM]) in 1990?
A) There were benefits to trade and other forms of cross-border exchange. B) Britain wanted to hold onto the pound as its currency. C) It was a member of the European Union and fixed rates were good for trade with other members. D) It hoped to participate in the new common currency when it was launched.
According to the rational expectations school, if the Fed announces a policy of rapid growth in the money supply, but then puts the brakes on money expansion without any announcement, which of the following is likely to be the short-run result?
a. An unexpected surge in aggregate demand b. An unexpected drop in aggregate demand. c. An anticipated surge in aggregate demand. d. An anticipated drop in aggregate demand. e. No change in aggregate demand.