The nominal interest rate
What will be an ideal response?
minus the inflation rate is the real interest rate.
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Which of the following is the least likely take place if the Fed responds to a negative demand shock by reducing the real interest rate?
A) IS shifts to the right B) output gap returns to zero C) inflation returns to its previous rate D) MP shifts down
On the graph above, suppose the economy is at point 1. Which sequence of points best illustrates the short-run and then long-run impacts of a permanent tax reduction? [Assume that potential output remains constant at .]
A) 2, 4, 1 B) 7, 2, 5 C) 2, 7, 6 D) 7, 8, 1
According to the above table, which assumes that opportunity costs of producing goods X and Y are constant, which of the following statements is TRUE?
A) Chen will be willing to produce only good X and trade units of that good to Holly as long as he receives more than 0.5 units of good Y from her in exchange. B) Holly will be willing to produce only good X and trade units of that good to Chen as long as she receives less than 2.5 units of good Y in exchange. C) Chen will be willing to produce only good Y and trade units of that good to Holly as long has he receives less than 2 units of good X from her in exchange. D) Holly will be willing to produce only good Y and trade units of that good to Chen as long as she receives less than 0.4 unit of good X in exchange.
An entrepreneur is
A) the rate of return on capital. B) a legal form of business. C) one who takes risks and makes innovations in organizing a firm. D) the rate of discount.