Explain how a change in expected future output could affect current output
What will be an ideal response?
There are two channels here. An increase in future expected output will increase future expected profits. When future expected profits rise, the discounted present value of profits will be higher. More projects will now occur. As investment today rises, demand rises, and, therefore, current output will rise. An increase in future expected output will also increase human wealth and, therefore, cause consumption to increase. The rise in consumption will increase demand and current output.
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Which of the following leads a good to have a high elasticity of supply? I. The good must be produced using unique resources. II. The good is produced using commonly available resources
A) I only B) II only C) I and II D) neither I nor II
If the Brazilian demand for American exports rises at the same time that U.S. productivity rises relative to Brazilian productivity, then, in the long run, ________, everything else held constant
A) the Brazilian real will appreciate relative to the U.S. dollar B) the Brazilian real will depreciate relative to the U.S. dollar C) the Brazilian real will either appreciate, depreciate, or remain constant relative to the U.S. dollar D) there is no effect on the Brazilian real relative to the U.S. dollar
One lesson of business: a. is tracing the consequences of a policy
b. promoting a policy change to eradicate inefficiencies. c. moving assets from lower to higher value uses, thereby creating wealth. d. None of the above
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.