If the marginal product of capital is greater than the rental cost of capital in terms of goods and services, then ________. A) the firm should continue to produce using that same amount of capital B) the firm should add additional capital C) the firm should reduce the amount of capital is using D) diminishing […]
Date: September 10th, 2020
Suppose oil prices suddenly begin to rise and the Fed announces that the increase in oil prices are not expected to generate excessive inflation. If the Fed is incorrect in its assumption that rising oil prices will not generate excessive inflation and the inflation rate increases before the Fed takes corrective action, then other things […]
Date: September 10th, 2020
Under monetary stabilization policy in the New Keynesian model, following a drop in output, the central bank should A) increase the price level. B) decrease the price level. C) increase the interest rate. D) decrease the interest rate. ANSWER D
Date: September 10th, 2020
If output begins to grow substantially faster than capital and labor inputs, then the real business cycle model predicts, ceteris paribus, ________. A) an increase in inflation B) a decrease in employment C) a decrease in investment D) a business cycle expansion ANSWER D
Date: September 10th, 2020
If one economic agent possesses more information than their fellow transactor ________. A) economic transactions cannot occur B) the moral hazard problem has been eliminated C) the adverse section problem has been eliminated D) asymmetric information exists ANSWER D
Date: September 10th, 2020
With an increase in total factor productivity in the Solow growth model, A) output decreases temporarily and returns to the previous steady state. B) output increases temporarily and returns to the previous steady state. C) the economy reaches a steady state with higher output. D) the economy reaches a steady state with lower output. […]
Date: September 10th, 2020
A firm possesses too much capital if ________. A) the real rental cost of capital is equal to the marginal product of capital B) the real rental cost of capital is less than the marginal product of capital C) its investment spending exceeds its consumption outlays D) the real rental cost of capital is more […]
Date: September 10th, 2020
If the Fed decides to increase interest rates to fight off potential inflation, and their policy action kept the inflation rate stable, then other things equal, this would result in A) the IS curve shifting to the right. B) the IS curve shifting to the left. C) the MP curve shifting up. D) the MP […]
Date: September 10th, 2020
If Year 1 is the base year, the growth of real GDP is approximately A) 100%. B) 109.5%. C) 137.5%. D) 148%. ANSWER C
Date: September 10th, 2020
The primary source of funds for finance companies is ________. A) commercial paper B) deposits C) securities D) the central bank ANSWER A
Date: September 10th, 2020
