What are the cost and benefits to a country instituting capital controls?
What will be an ideal response?
The benefits to a country instituting capital controls include the ability to fix the exchange rate and pursue domestic monetary policy objectives. In addition, a country that is open to capital inflows is vulnerable to capital outflows which can be very disruptive. As a result some countries institute capital inflow controls as well as capital outflow controls. The cost of capital controls is the loss in efficiency. When capital cannot flow to its most efficient use the loss in efficiency as well as the lost opportunities to improve diversification and equalize rates of return across international borders harm societies.
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All else equal, if there are diminishing returns and constant returns to scale, then what happens to productivity if capital and labor both increase but capital increases by more?
a. Productivity will definitely fall. b. Productivity will definitely be unchanged. c. Productivity will definitely rise. d. None of the above are necessarily correct.
If a hurricane were to wipe out the majority of the eastern seaboard in the United States:
A. neither the short-run nor long-run aggregate supply curves would be affected. B. only the long-run aggregate supply curve would shift left. C. only the short-run aggregate supply curve would shift left. D. the long-run and short-run aggregate supply curves would both shift left.
Governments usually build highways because it is difficult to exclude individuals who don't pay for the highways from using them. What type of market failure is involved?
A. Market power. B. Public goods. C. Externalities. D. Inequity.
How much money would be loaned out if there was no usury law?
