The idea that the production function exhibits _______ implies that ________
A) diminishing returns; the Lucas Wedge increases at output increases
B) diminishing returns; each additional unit of labor employed generates an ever-decreasing amount of real GDP
C) increasing returns; potential GDP is always increasing
D) increasing returns; output should increase steadily as technology grows
E) constant returns; each additional unit of labor employed generates an increasing amount of real GDP
B
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If the money supply in the economy were at MS3, to engage in expansionary policy the Federal Reserve Bank would use open market operation to move money supply to:
A. MS1
B. MS2
C. MS4
D. it would stay at MS3
Based on the graph showing the effective federal funds rate, the downturn in interest rates after the 2001 recession lasted ______.
a. a shorter time than most downturns
b. a longer time than most downturns
c. about the same time as most downturns
d. five years longer than any previous downturn
The change in consumption that results from a change in the relative price of goods while staying on the same indifference curve is the
A) income effect. B) substitution effect. C) indifference effect. D) price effect.
If the price level in the United States is 110, the price level is 135 in Mexico, and the nominal exchange rate is 12.5 pesos per dollar, what is the real exchange rate from the U.S. perspective?
A) 8.8 B) 10.2 C) 10.8 D) 11.4