Beth, an American citizen, travels to Italy on vacation and buys an espresso machine to bring home. Her purchase increases
a. Italy's GDP
b. Italy's GDP and U.S. GDP, since Beth spent dollars buying the machine.
c. U.S. GDP since she will have the machine with her at home in the U.S.
d. Neither U.S. nor Italy's GDP, since the product was bought in one country and used in another.
a
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In long-run macroeconomic equilibrium
A) real GDP equals potential GDP. B) the price level is fixed and aggregate demand determines real GDP. C) real GDP and the price level are determined by short-run aggregate supply and aggregate demand and long-run aggregate supply is irrelevant. D) real GDP is less than potential GDP.
Explain the time-inconsistency problem. What is the likely outcome of discretionary policy? What are the solutions to the time-inconsistency problem?
What will be an ideal response?
Which of the following was the main reason for increased counterparty risk in the shadow banking system prior to the financial crisis of 2007-2009?
A) increased leverage B) government insuring money market deposits C) many firms borrowing long term for short-term investments D) trading of derivatives on exchanges
Suppose the government imposes a per unit tax on an item whose production process creates a negative externality. Suppose the tax is exactly the value of the marginal externality cost. If the government now uses the tax revenue to clean up pollution from this process, the market will:
a. have internalized all costs and benefits. b. be inefficient. c. be destroyed. d. not have failed. e. be subject to obligatory controls.