In terms of economic growth, the central bank would like to:
A. balance every recession with a boom.
B. keep the growth rate averaging zero.
C. have the maximum growth rate possible.
D. keep the economy close to its potential or sustainable rate of growth.
Answer: D
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The sum of public spending on goods and services and transfer payments during a given period cannot exceed tax revenues plus borrowed funds. This is the statement for
A) ad valorem taxation. B) an excise tax. C) a sales tax. D) the government budget constraint.
Applied research: a. is designed to answer particular questions
b. is more open-ended than basic research. c. contributes less to visible output changes than does basic research. d. is research done by a firm to market a good. e. is research done by a firm during the production of a good.
A recessionary gap can be defined as:
a. an economy that is operating above its full-employment capacity. b. an economy that is operating at full-employment capacity. c. the amount by which aggregate expenditures exceeds the aggregate expenditures level needed to generate equilibrium real GDP at full employment without inflation d. the amount by which aggregate expenditures falls short of the level needed to generate equilibrium real GDP at full employment without inflation. e. the easiest way out of a depression.
A businessman is confronted with the following opportunity. He can invest $10,000 in a project that will either succeed wildly, fail miserably, or simply pay him back his $10,000. If wildly successful, the project will earn the businessman $110,000, but if it fails he will not get any money back.
i. If the businessman is risk neutral and he feels that there is a 1/2 chance of miserable failure, then what is the minimum probability of wild success required for him to want to invest in the project? ii. Based on the probability that you derived in part i, explain what you know about the minimum probability that would be required by a risk averse businessman.