Assume that foreign capital flows from a nation increase due to political uncertainly and increased risk. If the nation has highly mobile international capital markets and a fixed exchange rate system, what happens to the real risk-free interest rate and GDP Price Index in the context of the Three-Sector-Model?
a. The real risk-free interest rate rises and GDP Price Index rises
b. The real risk-free interest rate falls and GDP Price Index falls.
c. The real risk-free interest rate rises and GDP Price Index falls.
d. The real risk-free interest rate and GDP Price Index remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.C
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To convert the nominal interest rate to the real interest rate, we
A) divide the nominal interest rate by the inflation rate. B) multiply the nominal interest rate by the inflation rate. C) subtract the inflation rate from the nominal interest rate. D) add the inflation rate to the nominal interest rate. E) subtract the nominal interest rate from the inflation rate and then multiply by 100.
The income approach to measuring GDP sums together
A) compensation of employees, rental income, corporate profits, net interest, proprietors' income, subsidies paid by the government, indirect taxes paid, and depreciation. B) compensation of employees, rental income, corporate profits, net interest, proprietors' income, indirect taxes paid, and depreciation and subtracts subsidies paid by the government. C) the sales of each firm in the economy. D) the costs of each firm in the economy and then subtracts indirect business taxes and depreciation.
Ronald Coase's insight regarding the firm was that
a. firms tend to be more profitable when economies of scale are greater b. uncertainty and information are the keys to perfect competition c. perfectly competitive firms tend to displace monopolies d. economic activity is best understood in terms of the transaction costs of exchange e. consumers often carry out transactions directly with resource suppliers
The tradeoffs faced by a society can be illustrated in a graph known as the:
a. production operations curve. b. production cost curve. c. production cost model. d. production cost forecast curve. e. production possibilities curve.