A zero inflation rate is not the Fed's objective because
a. that would cause prices to rise
b. that would cause price to fall
c. it knows that it cannot attain a zero rate
d. it believes that the true rate of inflation is lower than what is measured by the Consumer Price Index (CPI)
e. high rates of inflation may help labor markets adjust more easily
D
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Because ________ in the government budget deficit increase the real interest rate, budget deficits can ________ firm investment
A) decreases; increase B) increases; decrease C) decreases; decrease D) increases; increase
Suppose the government decides to decrease the amount of investment spending that firms are allowed to depreciate for tax purposes from 50% to 25%, effective next year
What effect should this change have on the desired capital stock and the level of investment spending next year? Use a graph to explain your answer.
Suppose coal sells for $50 per ton and can be mined at a constant marginal cost of $20 per ton. Forecasters predict that the price of coal next year will be $55
If your marginal cost next year will still be $20 and the interest rate is 10%, do you sell coal today?
A movement from A to C in Figure 7.2 may represent
A) economies of scale. B) diseconomies of scale. C) learning. D) economies of scope. E) diseconomies of scope.