Which of the following will most likely occur during the recovery phase of a business cycle?
A. Real GDP rises, and unemployment falls.
B. Real GDP declines, and inflation rises.
C. Interest rates rise, and the number of business failures rise.
D. Inflation rises, and employment falls.
Answer: A
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The demand for houses decreases, all else equal, when
A) wealth increases. B) real estate prices are expected to increase. C) stock prices become more volatile. D) gold prices are expected to increase.
Assume the central bank decides to raise the discount rate. Where and how should you begin your analysis when analyzing the chain reaction of economic interactions?
a. Start the analysis in the real goods market with aggregate demand shifting to the left. b. Start the analysis in the real goods market with aggregate demand shifting to the right. c. Start the analysis in the real credit market with demand for real credit shifting to the left. d. Start the analysis in the real credit market with demand for real credit shifting to the right. e. Start the analysis in the real credit market with supply of real credit shifting to the left.
John is trying to decide whether to expand his business or not. If he continues his business as it is, with no expansion, there is a 50 percent chance he will earn $100,000 and a 50 percent chance he will earn $300,000. If he does expand, there is a 30 percent chance he will earn $100,000, a 30 percent chance he will earn $300,000 and a 40 percent chance he will earn $500,000. It will cost him $150,000 to expand. The expected value of John's earnings if he chooses to expand is:
A. $900,000 B. $140,000 C. $320,000 D. $230,000
When the price level rises more than expected, a firm with a sticky price will sell its output at a price that is
a. less than it desires and increase its production. b. less than it desires and decrease its production. c. more than it desires and increase its production. d. less than it desires and decrease its production.