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 real risk-free interest rate and real GDP in the context of the Three-Sector-Model?
a. The real risk-free interest rate falls and real GDP rises.
b. The real risk-free interest rate rises and real GDP remains the same.
c. The real risk-free interest rate and real GDP remain the same.
d. The real risk-free interest rate falls and real GDP falls.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.D
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The rutabaga market is perfectly competitive and the price of a ton of rutabagas rises. As a result, Rudy, a rutabaga farmer, will
A) decrease his output of rutabagas. B) not change his output of rutabagas because Rudy's firm is a price taker. C) increase his output of rutabagas. D) at first decrease and then increase his output of rutabagas. E) probably change his output of rutabagas, but more information is needed about the change in the marginal revenue of a ton of rutabagas.
Sweet Husks is a perfectly competitive corn farm. Currently, the expected price of an ear of corn is $0.20 and, at its current production level, Sweet Husks has a marginal cost of $.20 per ear. Which of the following is true regarding Sweet Husks?
A) To maximize expected profit, Sweet Husks should increase production. B) To maximize expected profit, Sweet Husks should decrease production. C) To maximize expected profit, Sweet Husks should double production. D) Sweet Husks is maximizing expected profit.
Compromise between the desire to facilitate international trade and the need to give domestic governments latitude to govern their economies is called
a. economic structuralism. b. embedded liberalism. c. reciprocity. d. voluntary export restraint.
According to the Pew Charitable Trust methodology for identifying the middle class, in 2014, the bottom end of the middle class is ________, and the top end is ________.
A. $42,000; $126,000 B. $75,000; $300,000 C. $50,000; $75,000 D. $30,000; $250,000