An active monetary policy that attempts to smooth out the business cycle would involve conducting ________ monetary policy during recessions and ________ monetary policy during expansions.
Fill in the blank(s) with the appropriate word(s).
expansionary; contractionary
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Standard economic theory asserts that sunk costs are irrelevant in making economic decisions, yet studies conducted by behavioral economists reveal that sunk costs often affect economic decisions. Which of the following could explain this observation?
A) Even though sunk costs cannot be recovered, it has been incurred and therefore should be treated as part of the product's value. B) People measure the value of a good in terms of its purchase price. C) Sunk costs have a higher opportunity cost than costs that can be recovered. D) If consumers maximize their utility, it makes sense to consider the full purchase price of a product in their consumption decisions.
Based on the information in Scenario 15.7, if you expect the price to be $21 next year, you should
A) keep the wine in barrels until next year no matter what the interest rate. B) keep the wine if interest rates are above 5%. C) keep the wine if interest rates are below 5%. D) sell the wine now. E) do nothing until you know what the interest rate is going to be for the following year.
The income net of taxes is called _____
a. real income b. disposable income c. nominal income d. taxable income e. personal income
The light bulbs currently made by a manufacturer currently last 1 year. People place a value of $2.42 on one year's worth of light from a light bulb, and the market rate of interest is 10%. The manufacturer is considering a quality improvement that would make its light bulbs last 3 years. Should the manufacturer make the quality improvement?
a. No, because it will substantially reduce the number of light bulbs sold. b. Yes, as long as it costs less than $2.42 per light bulb. c. Yes, as long as it costs less than $4.20 per light bulb. d. Yes, as long as it costs less than $4.84 per light bulb.