You have just read that Australia has suffered a drought, destroying its wheat crop for this year. The effect of this adverse supply shock on Australia would probably be
A. an increase in prices, an increase in nominal interest rates, but a decrease in real interest rates.
B. a decrease in prices and a decrease in real interest rates.
C. an increase in prices and an increase in real interest rates.
D. a decrease in prices, a decrease in nominal interest rates, but an increase in real interest rates.
Answer: C
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Chuck owns a factory that produces leather footballs. His total fixed cost equaled $86,000 last year. His total cost equaled $286,000 last year. Hence Chuck's
A) total variable cost was zero. B) incurred an economic loss. C) total variable cost equaled $200,000. D) total variable cost equaled $372,000. E) None of the above answers is correct.
Using the Keynesian model, the effect of an increase in the effective tax rate on capital would be to cause ________ in the real interest rate and ________ in output in the short run
A) a decrease; a decrease B) a decrease; no change C) an increase; an increase D) no change; a decrease
In the Keynesian world a rising real money supply causes GDP to __________ by __________ the real interest rate which causes a(n) __________ in investment
A) increase; increasing; increase B) increase; decreasing; increase C) decrease; increasing; increase D) decrease; increasing; decrease
A clean environment is healthier than a polluted environment. Use the law of increasing costs to explain why even environmentalists might not advocate laws banning all pollution