What happens to the LRAS curve when the level of potential output for an economy increases over time?
What will be an ideal response?
Ans: The LRAS curve shifts to the right: these shifts represent economic growth and are due to an increase in the labor force and/or an increase in the productivity of labor.
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Which of the following will cause Nation A's reserves account in the balance of payments to become more positive?
a. Increased holdings of official gold holdings. b. Nation A's central bank receives more borrowing rights at the International Monetary Fund. c. Nation A's central bank decreases its holdings of convertible foreign currencies. d. All of the above will cause the reserves account to become more positive. e. None of the above will cause the reserves account to become more positive.
Your neighbor in an apartment complex plays his music very loudly late at night, which makes it difficult for you to get to sleep. You offer the neighbor $50, the monetary value you put on your sleep, to never play his music between midnight and 7 AM. By
doing so A) you have failed to bring about an efficient solution since you should have complained to the police. B) you have indicated the cost of the externality. The externality is not internalized even if he accepts your offer. C) you have indicated the cost of the externality, which internalizes the externality. D) you have indicated a willingness to make the external cost a social cost.