Which of the following is used by lenders to reduce the problems that arise from asymmetries of information? A) patent contracts B) collateral C) decreased interest rates D) restrictive contents ANSWER B
A budget deficit ________. A) may have stimulative effects on economic activity in the short run B) contributes to lower interest rates in the long run C) is likely to increase future productive capacity in the long run D) all of the above E) none of the above ANSWER A
Assume that in an economy with 200M inhabitants, 90M work, 4M are looking for a job, 3M receive unemployment insurance compensation, and 6M receive unemployment insurance compensation and are looking for a job. What is the unemployment rate? A) 13% B) 10% C) 6.5% D) 5% ANSWER B
Consider the two graphs above. Suppose there is an increase in the real interest rate. This would ________ the desired level of the capital stock, as depicted in graph ________. A) increase; B B) increase; A C) decrease; B D) decrease; A ANSWER C
If exchange rates are floating, a contractionary monetary policy in the United States will cause the dollar to ________ relative to other currencies and cause net capital outflows to ________. A) appreciate; increase B) appreciate; decrease C) depreciate; increase D) depreciate; decrease ANSWER B
What issue is there regarding housing and the measurement of GDP? A) residential investment is measured using current house prices, not construction prices. B) houses are a capital and a consumption good. C) one does not know whether a house will be owned or rented when it is built. D) mobile homes are not counted. […]
How might real business cycle theorists respond to evidence of procyclical inflation? What will be an ideal response? ANSWER Since the aggregate demand curve is negatively-sloped, changes in potential output should relate negatively to inflation. Rising potential (actual) output should put downward pressure on prices, while negative productivity shocks should force prices up. Defenders […]
If government cuts taxes ________. A) national saving goes up B) the equilibrium interest rate would decrease C) discretionary income goes up D) all of the above E) none of the above ANSWER C
Consider the two graphs above. Suppose that financial liberalization enables more businesses to access credit markets. This would ________ the desired level of the capital stock, as depicted in graph ________. A) increase; B B) increase; A C) decrease; B D) decrease; A ANSWER A
Autonomous easing of monetary policy involves ________. A) raising interest rates and shifting the MP curve to the right B) lowering interest rates and shifting the MP curve to the left C) raising interest rates and shifting the MP curve to the left D) lowering interest rates and shifting the MP curve to the right […]