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 quantity of real loanable funds per time period and GDP Price Index in the context of the Three-Sector-Model?
a. The quantity of real loanable funds per time period rises and GDP Price Index rises.
b. The quantity of real loanable funds per time period falls and GDP Price Index falls.
c. The quantity of real loanable funds per time period rises and GDP Price Index falls.
d. The quantity of real loanable funds per time period and GDP Price Index remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.B
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The interest rate that banks charge other banks for loans is the
A) discount rate. B) prime rate. C) federal funds rate. D) Treasury bill rate.
The total amount of consumer surplus and producer surplus is at its maximum when
A) consumers and producers are allowed to trade at the market clearing price. B) the government imposes a price floor that is higher than the market clearing price. C) the government imposes a price ceiling that is lower than the market clearing price. D) free market exchanges do not exist.
People buy insurance:
a. to defer consumption. b. to insure against poor health. c. because they are risk averse. d. to maximize their welfare. e. because of externalities.
Suppose market demand and supply are given by Qd = 300 - 4P and QS = -50 + 3P. The equilibrium price is:
A. $60. B. $50. C. $40. D. $35.