Suppose that, when the price of steel drops, steel companies tend to cut back on investment in their non-steel activities more than other firms in these same non-steel activities. This would support the idea that
A) cash flow matters for investment.
B) cash flow does not matter for investment.
C) business firms do not care about profit.
D) business firms do not care about interest rates.
E) business firms do not use discounting.
A
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The formula for the deposit expansion multiplier =
A) 1 x required reserve ratio. B) 1 / required reserve ratio. C) 10 x required reserve ratio. D) 10 / required reserve ratio.
There is no deadweight loss from a tax:
A. only if demand is perfectly elastic. B. only if supply is perfectly inelastic. C. if either demand or supply is perfectly elastic. D. if either demand or supply is perfectly inelastic.
Demand pull inflation occurs when the:
A. price of a key input increases suddenly. B. price level changes in response to changes in the business cycle. C. price of necessity goods increases suddenly. D. business cycle becomes sporadic and unpredictable.
On October 12, 1987, the Dow Jones Industrial Average plunged 508 points, wiping out more than $500 billion in a few hours. How did the Fed respond to this drastic fall in the stock market index?
A) The Fed responded precisely as it did when faced with a similar situation in 1929, that is, it deemed that no action was necessary. B) To encourage the business community to invest in the stock market, the Fed announced that it will sell federal securities to raise the interest rate. C) In an attempt to ward off a recession, the Fed announced that it will provide adequate liquidity, by buying federal securities. D) The Fed provided long-term loans to those corporations that experienced significant decreases in their stock value.