Why do economists predict that investment increases when the real rate of interest falls?
What will be an ideal response?
When the interest rate falls, the present value of a future stream of payments increases. Some projects that might have been considered unprofitable at a high interest rate become profitable, and therefore are undertaken, at a lower interest rate.
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The self-correcting tendency of the economy means that falling inflation eventually eliminates:
A. exogenous spending. B. recessionary gaps. C. expansionary gaps. D. unemployment.
Suppose the U.S. government encouraged new teachers to take jobs in underperforming schools by paying the new teachers a $20,000 bonus. These teachers would be exemplifying the economic idea that
A) people are rational. B) people respond to economic incentives. C) equity is more important than efficiency. D) optimal decisions are made at the margin.
A market is said to achieve allocative efficiency when producer surplus is at its maximum level
a. True b. False Indicate whether the statement is true or false
Which of the following equations represents average variable cost?
a. $2,000 labor and materials + $2,000 rent and equipment leases = $4,000 b. $2,000 monthly rent and equipment leases / 500 units of output = $4 c. $2,000 labor and materials / 500 units of output = $4 d. $4,000 monthly rent, equipment lease, labor, and materials / 500 units of output = $8