The equilibrium real interest rate is 5 percent. If the real interest rate is
A) anything other than 5 percent, the supply of loanable funds curve and/or the demand for loanable funds curve will shift to move the real interest rate to 5 percent.
B) 6 percent, the demand for loanable funds curve will shift rightward as firms enter the market to borrow at the lower rate.
C) 2 percent, there is a shortage of loanable funds.
D) 8 percent, there is a surplus of loanable funds.
E) 3 percent, then the supply of loanable funds curve will shift leftward as new savers enter the market.
D
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When the Fed buys or sells government bonds to private banks in exchange for reserves, it is referred to as:
A) the Fed's dual mandate. B) open market operations. C) reserve targeting. D) moral suasion.
When the government hires people to serve in the army, these people are no longer available to do other work. This choice illustrates the concept of
A) an incentive. B) a social interest/private interest conflict. C) opportunity cost. D) marginal benefit.
Consider an apple orchard owner deciding how to incentivize his fruit pickers. He pays per pound harvested but adjusts the compensation rate higher during poor harvest seasons. As a consequence
a. The compensation rate should be fixed at all times b. The pickers might try to game the system by discouraging others from harvesting too much c. The pickers would claim good harvests in order to be paid higher piece rates even during poor harvest seasons d. None of the above
Compensation of employees is the largest component of GDP using the income approach
a. True b. False Indicate whether the statement is true or false