In a large open economy, the home country's saving and investment equations are: Sd = 200 + 700rw and Id = 300 - 200rw. The foreign country's saving and investment equations are: Sd = 50 + 300rw and Id = 75 - 50rw. In equilibrium, the world real interest rate =
A. 0.40.
B. 0.25.
C. 0.20.
D. 0.10.
Answer: D
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Institutions that make loans to borrowers and obtain funds from savers are called
A) financial markets. B) financial intermediaries. C) financial conglomerates. D) financial branches.
In perfect competition, if firms enter the market in the long run
A) total supply will increase causing market price to increase. B) total supply will decrease causing market price to decrease. C) total supply will decrease causing market price to increase. D) total supply will increase causing market price to decrease.
Using the aggregate expenditure-output model, assume the aggregate expenditures (AE) line is below the 45-degree line at full-employment GDP. This vertical distance is called a(n):
a. inflationary gap. b. recessionary gap. c. negative GDP gap. d. marginal propensity to consume gap.
The value of the next best alternative defines ___________________.
Fill in the blank(s) with the appropriate word(s).