Suppose that Toyota buys a factory previous owned by Chrysler Motors. Economists would:
A. consider this to be an economic investment.
B. not consider this to be an economic investment because Toyota is less efficient than
Chrysler.
C. not consider this to be an economic investment because no new capital is created through
the purchase.
D. not consider this to be an economic investment because there is no way to know how it will
affect stock holdings in the two companies.
Answer: C
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Suppose the country of Quasiland experienced a decrease in real GDP and people were laid off from their jobs. The people would be considered part of
A) frictional unemployment. B) structural unemployment. C) cyclical unemployment. D) discouraged workers.
Due to asymmetric information in credit markets, monetary policy may affect economic activity through the balance sheet channel, where an increase in the money supply
A) raises stock prices, lowering the cost of new capital relative to firms' market value, thus increasing investment spending. B) raises firms' net worth, decreasing adverse selection and moral hazard problems, thus increasing banks' willingness to lend to finance investment spending. C) raises the level of bank reserves, deposits, and bank loans, thereby raising spending by those individuals who do not have access to credit markets. D) lowers the value of the dollar, increasing net exports and aggregate demand.
Testing a theory by comparing the theory's implications with data obtained in the real world is called
A) empirical analysis. B) descriptive calibration. C) historical variance analysis. D) univariate analysis.
A capital ________ can promote financial instability in an emerging-market country because it is what forces a country to ________ its currency
A) inflow; devalue B) inflow; revalue C) outflow; devalue D) outflow; revalue