What are the two main components of business cycle theories?
A) A description of shocks and a model of how the economy responds to them
B) A model of how people decide to spend and a description of the government's role in the economy
C) A model of how equilibrium is reached and a description of the government's role in the economy
D) A description of shocks and a description of the government's role in the economy
A
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On any given day, a salesman can earn $0 with a 20% probability, $100 with a 40% probability, or $300 with a 20% probability. His expected earnings equal
A) $0. B) $100 because that is the most likely outcome. C) $100 because that is what he will earn on average. D) $200 because that is what he will earn on average.
Briefly explain what real business cycle theorists believe causes the business cycle and give an example of how this takes place.
What will be an ideal response?
Mary wants to open her own taco stand. Which of the following will probably happen?
a. She will start up her business in a year because she has to wait to get government approval. b. She will start up her business in a month because of low cost and ease of entry. c. She will take six months to start her business because of all the government certificates she has to get. d. She will take three months to start her business because she has to borrow to pay start-up fees.
Suppose that in a month the price of a liter of soda increases from $1 to $1.50. At the same time, the quantity of liters of soda supplied increases from 200 to 210. The price elasticity of supply for liters of soda (calculated using the initial value formula) is:
A. 0.1. B. 0.5. C. 10. D. 20.