Net investment
A) equals gross investment plus depreciation.
B) is the only measure of investment used to calculate GDP.
C) equals gross investment minus depreciation.
D) is equivalent to the existing capital stock in the economy.
C
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Why does a principal-agent problem create transactions costs? If the goal is economic efficiency, what liability rule should be used when a principal-agent problem exists?
What will be an ideal response?
Suppose the United States reduced the tariff on digital camera, allowing foreign-produced cameras to more freely enter the U.S. market. Which of the following would most likely occur?
a. The price of cameras to U.S. consumers would increase, and the demand for U.S. export products would rise. b. The price of cameras to U.S. consumers would fall, and the demand for U.S. export products would fall. c. The price of cameras to U.S. consumers would increase, and the demand for U.S. export products would fall. d. The price of cameras to U.S. consumers would fall, and the demand for U.S. export products would rise.
Assume that the central bank increases the reserve requirement. If the nation has low mobility international capital markets and a flexible exchange rate system, what happens to real GDP and net nonreserve-related international borrowing/lending in the context of the Three-Sector-Model?
a. Real GDP falls, and net nonreserve-related international borrowing/lending becomes more negative (or less positive). b. Real GDP rises, and net nonreserve-related international borrowing/lending becomes more negative (or less positive). c. Real GDP falls, and net nonreserve-related international borrowing/lending becomes more positive (or less negative). d. Real GDP and net nonreserve-related international borrowing/lending remain the same. e. There is not enough information to determine what happens to these two macroeconomic variables.
The answer is: "A geographic area in which exchange rates can be fixed or a common currency used without sacrificing domestic economic goals." What is the question?
A) What is a flexible exchange rate system? B) What is a managed float area? C) What is a purchasing power parity area? D) What is an optimal currency area?