Assume that the government increases spending and finances the expenditures by borrowing in the domestic capital markets. 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 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. There is not enough information to determine what happens to these two macroeconomic variables.
c. The real risk-free interest rate and GDP Price Index remain the same.
d. The real risk-free interest rate falls, and GDP Price Index falls.
e. The real risk-free interest rate rises, and GDP Price Index falls.
.A
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Suppose the federal government increases the unemployment benefits financed by higher income taxes. In this case, which of the following is likely to occur?
a. An increase in the equilibrium real GDP b. A redistribution of disposable income from the employed to the unemployed c. An increase in the interest rate d. An increase in the discount rate charged by the Central Bank e. An increase in the income of the rich and a decrease in the income of the poor
What are the factors that can cause a shift in the production possibilities curve?
Taking money from a wealthy individual in order to feed a destitute family would be a Pareto improvement
a. True b. False
Total product will start to decrease
A) at the quantity where the law of diminishing returns starts. B) when average physical product decreases. C) when marginal physical product increases. D) when marginal physical product becomes negative.