Assume that the expectation of a recession next year causes business investments and household consumption to fall, as well as the financing to support it. If the nation has low mobility international capital markets and a fixed exchange rate system, what happens to the GDP Price Index and current international transactions balance in the context of the Three-Sector-Model?
a. The GDP Price Index
falls and current international transactions balance becomes more positive (or less negative).
b. The GDP Price Index and current international transactions balance remain the same.
c. The GDP Price Index falls and current international transactions balance remains the same.
d. Real GDP falls and nominal value of the domestic currency rises.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.A
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Answer the following statement true (T) or false (F)
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a. True b. False
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a. although the monopoly price is the best price for all firms, oligopolists are unaware of this and thus charge prices that are lower than the price that could be charged by a monopolists, therefore, decreasing social welfare. b. although the monopoly price maximizes the joint profits of the firms, a secret price cut by any individual firm will increase the profits of that firm; hence, collusive agreements tend to break down. c. the demand for the products of oligopolistic industries is inherently unstable relative to the demand for the products of non-oligopolistic industries because demand for products in oligopolistic industries are dependent on changes in consumer tastes and preferences. d. firms in oligopolistic industries have more concern for consumers than do firms in competitive industries.