Ben consumes soda and cheeseburgers. If his marginal utility from sodas is currently 20, and his marginal utility from cheeseburgers is 10, and the price of cheeseburgers is twice the price of sodas,
a. Ben is in equilibrium
b. Ben should increase his soda consumption and decrease his cheeseburger consumption.
c. Ben should decrease his soda consumption and increase his cheeseburger consumption.
d. we cannot conclude that any of the above are correct.
b
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Firms that participate in regular open market transactions with the Federal Reserve are called
A) Treasury banks. B) Federal Reserve partners. C) primary dealers. D) secondary market banks.
In the short-run macro model, adjustment toward equilibrium is facilitated by price changes
a. True b. False
The rational expectations hypothesis indicates that people
a. pay little attention to policy when forming their expectations about the future. b. expect the next period to be pretty much like the recent past, regardless of policy changes. c. will always be able to forecast the future accurately. d. change their expectations about the future if policy changes.
Assume that the expectation of a recession next year causes business investments and household consumption to fall, as well as the financing to support it. If the nation has low mobility international capital markets and a fixed exchange rate system, what happens to the real risk-free interest rate and net nonreserve international borrowing/investing in the context of the Three-Sector-Model?
a. The real risk-free interest rate rises and net nonreserve international borrowing/investing becomes more positive (or less negative). b. The real risk-free interest rate falls and net nonreserve international borrowing/investing becomes more negative (or less positive). c. The real risk-free interest rate rises and net nonreserve international borrowing/investing becomes more negative (or less positive). d. The real risk-free interest rate and net nonreserve international borrowing/investing remain the same. e. There is not enough information to determine what happens to these two macroeconomic variables.