The accompanying figure shows Avery's weekly production possibilities curve for scarves.
For Avery, the opportunity cost of making a red scarf is:
A. zero.
B. increasing.
C. 1 blue scarf.
D. decreasing.
Answer: C
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The amount of borrowed reserves is ________ related to the discount rate, and is ________ related to the market interest rate
A) negatively; negatively B) negatively; positively C) positively; negatively D) positively; positively
Which of the following events did not contribute to the high rate of bank failures in the 1980s and 1990s?
a. The collapse of the communist world, principally Russia; because of the collapse,they could not pay off their loans to U.S. banks b. Falling farm prices in the U.S. c. Bad loans to Mexico d. An unexpected slide in oil prices e. Falling agricultural land values
Assume that the expectation of declining housing prices cause households to reduce their demand for new houses and the financing that accompanies it. 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 remains the same. e. There is not enough information to determine what happens to these two macroeconomic variables.
Refer to the accompanying figure.
Starting from long-run equilibrium at point C, a decrease in government spending that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at ________ creating ________ gap.
A. D; an expansionary B. B; no output C. D; a recessionary D. B; recessionary