Zero lower bound refers to:
A. a level below which the Fed cannot further reduce short-term interest rates.
B. a situation where there is little to no inflation.
C. the rate that the Federal Reserve is currently paying on bank reserves.
D. a bank with zero excess reserves.
Answer: A
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Suppose that there is a negative externality associated with alcohol consumption in the United States (e.g., costs of publicly funded alcoholism treatment centers). What will happen to the social costs of this externality if the United States eliminates all tariffs on alcohol imports?
a. The social coasts will increase. b. They will not change. c. They will decrease. d. The social costs will increase but be offset by the private losses associated with increased imports as the tariffs are eliminated.
If the prices of X and Y are $2 and $4 per unit, respectively, and this consumer has $10 in income to spend, to maximize total utility, this consumer should buy:
A. 1 unit of X and 1 unit of Y.
B. 2 units of X and 2 units of Y.
C. 1 unit of X and 2 units of Y.
D. 5 units of X and no units of Y.