Which phase of the business cycle would be most closely associated with an economic contraction?
a. Recession
b. Trough
c. Peak
d. Recovery
a. Recession
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Starting from long-run equilibrium, an increase in autonomous consumption results in ________ output in the short run and ________ output in the long run.
A. higher; higher B. higher; potential C. lower; higher D. lower; potential
The marginal rate of technical substitution is measured by
A) the relative input prices. B) the slope of the isocost line. C) the slope of the isoquant. D) the ratio of the product's price to the product's cost of production.
The shortsightedness effect suggests that
a. politicians have a strong incentive to support projects that yield immediate and easily recognized benefits, especially when the costs of the projects are difficult to identify and are observable only in the distant future. b. politicians have a strong incentive to support projects that yield benefits in the distant future, especially when the costs of the project must be paid for in the current period. c. voters will tend to weigh future costs and benefits more heavily than current costs and benefits. d. legislators will be unwilling to trade votes on issues, especially when those issues benefit only special interest groups.
Why is the nominal interest rate the opportunity cost of holding money?
What will be an ideal response?