Explain Okun's Law
What will be an ideal response?
It shows the relationship between GDP growth and unemployment rate. If output growth is high, unemployment will decrease.
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Adverse selection is a problem associated with equity and debt contracts arising from
A) the lender's relative lack of information about the borrower's potential returns and risks of his investment activities. B) the lender's inability to legally require sufficient collateral to cover a 100% loss if the borrower defaults. C) the borrower's lack of incentive to seek a loan for highly risky investments. D) the lender's inability to restrict the borrower from changing his behavior once given a loan.
The value added at all stages of production sums to the market value of the final good, and the value added for all final goods sums to GDP based on the income approach
a. True b. False Indicate whether the statement is true or false
If a good is produced up to the point where marginal social benefit equals marginal social cost, then:
a. social welfare is maximized. b. the good is overproduced and the market is inefficient. c. firms are earning zero profits. d. all externalities have been eliminated.
The ceteris paribus assumption means
A) favors are returned in kind. B) this is the proof of the matter. C) from many, one. D) other things are equal.