Which of the following would not be considered a real variable in determining a real business cycle?
a. A change in technology
b. A labor strike
c. An increase in the money supply
d. A change in tastes
e. A substantial weather event
c
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When there is an expansionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; expand B. increase; raise; decline C. decline; lower; decline D. decline; raise; decline
Dan has a car valued at $10,000 that gives him a utility of 50 units. There is a 10 percent chance that he will have an accident that will make his car worthless, in which case his utility will be zero
His utility from a wealth of $7,000 is 45 units. The maximum amount Dan will be willing to pay for car insurance is A) $1,000. B) $3,000. C) $7,000. D) zero.
Adverse selection in insurance implies that
a. all people face the same risk b. potential customers facing more risk are no more interested in purchasing insurance c. people are not risk averse d. insurers cannot tell the risk levels that different individuals face
A Texas household receives a Social Security check for $1500, which it uses to purchase a $40 pair of shoes made in Thailand by a Thai firm, a $1240 television made by a Korean firm in Korea, and $220 on groceries from a local store. As a result, U.S. GDP
a. increases by $40. b. increases by $220. c. increases by $280. d. increases by $1500.