When there is a recessionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; decline
B. increase; raise; decline
C. decline; lower; expand
D. decline; raise; decline
Answer: C
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In the figure above, a factor that could cause the demand for bonds to shift to the right is
A) an increase in the riskiness of bonds relative to other assets. B) an increase in the expected rate of inflation. C) expectations of lower interest rates in the future. D) a decrease in wealth.
According to ________, people are often risk averse when it comes to gains and risk preferring when it comes to losses
A) prospect theory B) the reflection effect C) the certainty effect D) the framing effect
Under monopsony, marginal factor cost
A) is downward sloping. B) is less than the wage rate, although it increases as more workers are hired. C) equals the wage rate. D) is greater than the going wage rate.
Which of the following policies is an example of a command-and-control policy?
a. subsidies to education b. maximum levels of pollution that factories may emit c. tradable pollution permits d. None of the above is an example of a command-and-control policy.