Which of the following events will increase the domestic real interest rate in an open economy?
A. An increase in net capital inflow
B. An increase in domestic saving
C. A decrease in the domestic saving
D. A decrease in the perceived riskiness of investing in the domestic economy
Answer: C
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The self-correcting tendency of the economy means that falling inflation eventually eliminates:
A. exogenous spending. B. recessionary gaps. C. expansionary gaps. D. unemployment.
A major distinction between a monopolistically competitive firm and an oligopolistic firm is that
A. one is a price taker and the other is a price maker. B. one necessarily faces a downward-sloping demand curve and the other a horizontal demand curve. C. one always produces differentiated products and the other always produces a homogeneous product. D. a recognized interdependence exists between firms in one industry but not in the other.
A common definition of a recession is a time with
A) a decline in the price level. B) a decline in interest rates. C) a decrease in real GDP for two or more successive quarters. D) a decrease in real GDP for two or more successive years.
Jessica owns a company that makes pre-packaged sandwiches for convenience stores. The market price for a sandwich is $5 and Jessica is a price-taker. Her daily variable cost for making sandwiches is C(Q) = 2.5Q + (Q2/40) and her marginal cost is MC = 2.5 + (Q/20). She is currently producing sandwiches according to the quantity rule. What should Jessica do if she has an avoidable fixed cost of $50 a day?
A. She should keep producing sandwiches because the price is greater than the minimum of average fixed cost. B. She should keep producing sandwiches because she is maximizing profit at the current quantity. C. She should shut down production because the price is greater than the minimum of average cost. D. She should shut down production because the fixed cost can be avoided if she does.