To achieve long-run equilibrium in an economy with a recessionary gap, without the use of stabilization policy, the inflation rate must:
A. not change.
B. increase.
C. decrease.
D. either increase or decrease depending on the relative shifts of AD and AS.
Answer: C
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Use the following graph to answer the next question.
The graph shows the cost curves for a perfectly competitive firm. If the market price of the product is $1.25 per unit, then the firm will produce how many units to maximize profits in the short run?
A. 15 B. 20 C. 0 D. 35
Countries that are more open to international trade tend to have
A) property rights that are not well defined. B) higher levels of economic growth. C) lower levels of physical capital. D) lower levels of economic growth.
If Japan has a comparative advantage over Canada in the production of computers, which of the following must be true?
a. Supply of unskilled labor in Japan is higher than that in Canada. b. Japan incurs a lower input cost in the production of computers. c. Japan incurs a higher input cost in the production of computers. d. Japan has a lower opportunity cost in the production of computers. e. Japan has a higher opportunity cost in the production of computers.
What is meant by the “Federal funds market” and what is the Federal funds rate?
What will be an ideal response?