Which of the following conditions do NOT exist in long-run equilibrium?
a. Domestic nominal interest rates are such that the supply of real balances is equal to demand.
b. The domestic real return is equal to the foreign real return through the equilibrium exchange rate.
c. There are no price level or exchange rate changes and therefore the expected future exchange rate is equal to the actual exchange rate.
d. Domestic nominal interest rates are such that the supply of real balances is greater than demand.
Answer: d. Domestic nominal interest rates are such that the supply of real balances is greater than demand.
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In behavioral economics, the endowment effect refers to the fact that
A) most people believe that most wealthy people inherit their wealth. B) many people would be indifferent between being endowed with money or knowledge. C) many people place a higher value on what they own than the same item they are considering purchasing. D) most people respond to tax incentives to provide an endowment for their children.
If a bank had demand deposits of $80 million and it faced a 25 percent required reserve ratio, it would be able to have a maximum amount of how many dollars worth of loans?
a. $20 million b. $40 million c. $60 million d. $80 million
England can benefit from trade
a. only with nations that can produce goods England cannot produce. b. only with less developed nations. c. only with nations outside of Europe. d. with any nation.
Smith and Jones comprise a two-person economy. Their hourly rates of production are shown in the accompanying table. Calculators Per HourComputers Per HourSmith10010Jones1206 If Smith and Jones are dividing their time efficiently and producing more than 10 computers and fewer than 120 calculators per hour, then Smith will ________ and Jones will ________.
A. split his time between computers and calculators; produce only computers B. produce only computers; split his time between computers and calculators C. produce only calculators; produce only computers D. produce only computers; produce only calculators