Assume that the expectation of declining housing prices cause households to reduce their demand for new houses and the financing that accompanies it. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to the real risk-free interest rate and reserve-related (central bank) transactions in the context of the Three-Sector-Model?
a. The real risk-free interest rate falls, and reserve-related (central bank) transactions remain the same.
b. The real risk-free interest rate rises, and reserve-related (central bank) transactions remain the same.
c. There is not enough information to determine what happens to these two macroeconomic variables.
d. The real risk-free interest rate falls, and reserve-related (central bank) transactions become more negative (or less positive).
e. The real risk-free interest rate falls, and reserve-related (central bank) transactions become more positive (or less negative).
.A
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An economist at the University of Alaska at Anchorage has been asked to explain why the price of Alaskan crude oil has fallen recently. In order to develop a model, the professor should take which steps?
a. Identify the problem, develop a model based on simplifying assumptions and test the model to formulate a conclusion. b. Gather data on crude oil prices and seemingly unrelated variables in order to look for associations, then formulate a hypothesis based on those unexpected associations. c. Ask people in Alaska why they are not purchasing oil. d. None of these. The oil industry is controlled by a cartel; therefore price changes in the industry cannot be explained using economic theories.
If output is falling, a procyclical fiscal policy will result in:
A. lower taxes and/or decreased government spending. B. higher taxes and/or decreased government spending. C. higher taxes and/or increased government spending. D. lower taxes and/or increased government spending.
Refer to Scenario 9.5 below to answer the question(s) that follow. SCENARIO 9.5: Investors put up $520,000 to construct a building and purchase all equipment for a new restaurant. The investors expect to earn a minimum return of 10 percent on their investment. The restaurant is open 52 weeks per year and serves 900 meals per week. The fixed costs are spread over the 52 weeks (i.e. prorated weekly). Included in the fixed costs is the 10% return to the investors and $1,000 per week in other fixed costs. Variable costs include $1,000 in weekly wages and $600 per week for materials, electricity, etc. The restaurant charges $3 on average per meal. Refer to Scenario 9.5. In the short run, if the restaurant shuts down, it ________ variable costs and ________ revenue.
A. has; earns B. has no; earns C. has; earns no D. has no; earns no
You are given the following information on the various sectors of the economy. Derive the aggregate expenditure function
C = 100 + 0.75Y I = 200 + 0.20Y G = 500 X = 250 M = 100 + 0.10Y