Distinguish the short run from the long run. Generally, what causes costs of production to vary with output in the short run? What generally causes costs of production to vary in the long run?
The short run is any amount of time in which at least one resource is fixed. In the short run there are some fixed costs. In the long run, nothing is fixed. There are no fixed costs in the long run. Costs of production vary with output in the short run because of increasing and diminishing returns. Costs of production vary with output in the long run because of economies and diseconomies of scale.
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A bank that expects interest rates to fall will
A) want the duration of its assets to be greater than the duration of its liabilities—a positive duration gap. B) want the duration of its assets to be less than the duration of its liabilities—a positive duration gap. C) want the duration of its assets to be greater than the duration of its liabilities—a negative duration gap. D) want the duration of its assets to be less than the duration of its liabilities—a negative duration gap.
The index of leading economic indicators usually turns downward: a. prior to economic expansions
b. prior to economic contractions. c. prior to a contraction, but then turns upward before the contraction begins. d. a full 24 months before a recession begins.
The typical economic life cycle illustrates how people tend to
a. borrow more when they are younger and save more when they are middle-aged. b. earn their peak incomes immediately prior to the typical retirement age of 65. c. adjust their consumption based on changes in their transitory income. d. All of the above are correct.
There are several advantages that a market economy possesses. These do not include the fact that market economies:
A) tend to result in high living standards. B) tend to encourage greater economic growth. C) tend to prevent entrepreneurial activity that would result in large accumulations of wealth in the hands of a few people. D) none of the above is true