At the beginning of 2006 the yield curve was usually flat, and sometimes downward sloping (inverted). This raised concerns that a recession might be on the way. But the slope of the yield curve is only part of the story. What else is important?
What will be an ideal response?
A recession is associated both with an inverted yield curve and with an increase in the risk spread. As illustrated in the text, in 2006 Baa bond yields were less than two percentage points above U.S. Treasury yields, well below levels associated with recessions.
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Large differences in inflation rates among countries are almost always the result of large differences in
A) productivity. B) real income growth. C) the growth rates of real money demand. D) the growth rates of nominal money supplies.
The use of money ________ barter, and ________ economic specialization
A) eliminates the need for, increases B) eliminates the need for, decreases C) enhances the efficiency of, increases D) enhances the efficiency of, decreases
To maximize expected profit, a perfectly competitive firm with a random marginal cost and random demand should produce at the level that sets ________ equal to ________.
A) price; expected marginal cost B) price; marginal cost C) expected price; marginal cost D) expected price; expected marginal cost
We call costs that fall directly on an economic decision maker:
A. social costs. B. external costs. C. network costs. D. private costs.