In the loanable funds market
A. demand for loanable funds shifts right if the interest rate falls.
B. demand is downward sloping because lower interest rates make more capital projects profitable.
C. demand for loanable funds shifts right in the interest rate rises.
D. supply is vertical because loanable funds are fixed in any relevant time frame.
Answer: B
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Starting from long-run equilibrium, a large decrease in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; lower; potential B. expansionary; higher; potential C. recessionary; lower; potential D. recessionary; lower; lower
Expectations about future profitability
A) only affect the level of investment and GDP in the future. B) only affect the level of investment in the future, but can affect the level of GDP in the present. C) can affect the level of investment and GDP in the present. D) only affect the level of GDP in the future, but can affect the level of investment in the present.
Mel is thinking of going on a cruise. Mel values a cruise in nice weather at $2,000 and values a cruise in bad weather at $50. The probability of nice weather is 60 percent and the probability of bad weather is 40 percent. Trip insurance is sometimes available. If purchased, it allows travelers to delay the cruise until the weather is nice. The amount of money that Mel is willing to pay for trip insurance will be:
A. the same regardless of whether she is risk-averse or risk-neutral. B. positive if she is risk-neutral and negative if she is risk-averse. C. lower if she is risk-averse instead of risk-neutral. D. higher if she is risk-averse instead of risk-neutral.
The poverty rate in the United States is highest for:
A. married couples. B. childless households. C. female headed households. D. single people.