Suppose that Federal Reserve policy leads to higher interest rates in the United States
How will this policy affect real GDP in the short run if the United States is a closed economy, and how will it affect real GDP in the short run if the United States is an open economy?
For a closed economy, higher interest rates decrease domestic investment spending and purchases of consumer durables in the short run so that real GDP decreases. For an open economy, higher interest rates decrease domestic investment spending and purchases of consumer durables, as they do in a closed economy. However, in an open economy, higher interest rates also raise the value of the dollar in the foreign exchange market. As a result, net exports will decrease and, therefore, the decrease in real GDP is larger for an open economy than for a closed economy.
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A new cattle feed has been found to increase the amount of milk each cow produces. Which of these is a likely impact in the market for milk, if this cattle feed is used by most of the dairies?
a. A rightward shift of the supply curve for milk b. An increase in the demand for milk c. A decrease in the quantity demanded of milk d. A leftward shift of the supply curve for milk e. An increase in the price of milk
Which of the following is an example of a common resource?
A) elephants in the wild B) lions in a zoo C) public transportation D) a college education
Your text refers to airlines as "The Kings of Price Discrimination." Why is price discrimination common in the airline industry?
What will be an ideal response?
The rate at which an employer provides an incentive for an employee to perform (to increase effort) is the:
A. risk-sharing premium. B. efficient bargaining solution. C. incentive coefficient. D. informativeness quotient.