If a business finds its production is becoming more efficient as it increases production, the organization is experiencing what specialization advantage?
Ans: Economies of scale.
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Explain the concept of purchasing power parity
What will be an ideal response?
According to the Lucas critique, if past increases in the short-term interest rate have always been temporary, then
A) the term-structure relationship using past data will then show only a weak effect of changes in the short-term interest rate on the long-term rate. B) the term-structure relationship using past data will show no effect of changes in the short-term interest rate on the long-term rate. C) one cannot predict the term-structure relationship as it depends on expectations. D) the term-structure relationship using past data will nevertheless show a strong effect of changes in the short-term interest rate on the long-term rate because of a change in the way expectations are formed.
Refer to the accompanying figure.
Starting from long-run equilibrium at point C, a decrease in government spending that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at ________ creating ________ gap.
A. D; an expansionary B. B; no output C. D; a recessionary D. B; recessionary
If technological change increases the profitability of new investment for firms, then the ________ curve for loanable funds will shift to the ________ and the equilibrium real interest rate will ________
A) supply; right; fall B) supply; left; rise C) demand; right; rise D) demand; left; fall