Assume that the central bank purchases government securities in the open market. If the nation has low mobility international capital markets and a flexible exchange rate system, what happens to the real risk-free interest rate and GDP Price Index in the context of the Three-Sector-Model?
a. The real risk-free interest rate falls, and GDP Price Index falls.
b. The real risk-free interest rate rises, and GDP Price Index falls.
c. The real risk-free interest rate and GDP Price Index remain the same.
d. The real risk-free interest rate falls, and GDP Price Index rises.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.D
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Following a major natural disaster that destroys housing, a rent ceiling ________ be an effective policy to increase the quantity of more affordable housing for displaced residents because it would ________
A) would not; discourage rebuilding and result in a shortage B) would not; cause the quantity supplied to exceed the quantity demanded C) would; cause increased search activity D) would; create a black market that would result in a lower rent E) would; encourage a greater quantity supplied
Which of the following shifts the short-run aggregate supply curve to the right?
a. a decrease in the actual price level b. an increase in the actual price level c. a decrease in the expected price level d. an increase in the expected price level
George always purchases the soda with the lowest price. For George, the cross price elasticity of demand for two brands of soda will be
A) equal to 0. B) negative. C) positive. D) impossible to determine without more information.
If productivity increases as wages increase and firms pay a wage ________ the market clearing wage, then a potential benefit these firms may receive is a(n) ________ in employee turnover.
A. below; increase B. above; reduction C. below; reduction D. above; increase