If the government budget deficit rises, what happens to the interest rate? What does this change in the interest rate do to net capital outflow? Provide a detailed explanation of why this change in the interest rate changes net capital outflow
The interest rate rises. The increase in the interest rate reduces net capital outflow. As domestic interest rates are higher, domestic assets are more attractive. So, domestic residents purchase fewer foreign assets and foreign residents purchase more domestic assets. Both actions reduce net capital outflow.
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Reserve requirements are set by
A) the Secretary of Treasury. B) the President. C) Congress. D) the Fed.
In the long run in a perfectly competitive market:
A. supply is perfectly elastic when all firms have the same cost structure. B. firms operate at an efficient scale. C. firms earn zero economic profits. D. All of these are true.
Why does the short-run equilibrium situation usually not last long?
a. Firm downsizing happens in the long run. b. Government regulations are applied in the long run. c. Higher taxes are enforced in the long run. d. Entry and exit happen in the long run.
If demand is represented as Qd = 18 - 6P and supply is represented as Qs = 3 + 9P, the equilibrium price is
A. $1. B. $4. C. $7. D. $12.