Which of the following statements is correct regarding the lags in fiscal and monetary policy?
A. The inside lag is the time needed for monetary policy to be effective while the outside lag is the time needed for fiscal policy to be effective.
B. The outside lag is the time needed for monetary policy to be effective while the inside lag is the time needed for fiscal policy to be effective.
C. The lag for monetary policy is shorter than the lag for fiscal policy.
D. The lag for fiscal policy is shorter than the lag for monetary policy.
Answer: C
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Starting from long-run equilibrium, a decrease in autonomous investment results in ________ output in the short run and ________ output in the long run.
A. lower; potential B. higher; higher C. higher; potential D. lower; higher
What is frictional unemployment?
What will be an ideal response?
The opportunity cost of capital for a consumer's investment decision depends on their financial situation. Which rate should the consumer use?
A) The interest rate on investment opportunities if the consumer is a net saver. B) The interest rate paid on debts if the consumer is a net debtor. C) A and B are correct D) The same interest rate that local firms use to analyze their investment opportunities.
What does the area labeled A show?
a. increase in revenue due to change in quantity
b. decrease in revenue due to change in quantity
c. increase in revenue due to change in price
d. decrease in revenue due to change in price