The self-correcting property of the economy means that output gaps are eventually eliminated by:
A. increasing or decreasing potential output.
B. government policy.
C. decreasing inflation only.
D. increasing or decreasing inflation.
Answer: D
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Assume the First Bank of Townsville makes a loan of $2,500. This loan will
A) increase the First Bank of Townville's liabilities at the Fed. B) have no change on the quantity of money, just its composition. C) increase the First Bank of Townville's reserves. D) increase the quantity of money initially by $2,500. E) decrease the quantity of money initially by $2,500.
Andrew has the utility of wealth curve shown in the above figure. He owns an SUV worth $30,000, and that is his only wealth. There is a 10 percent chance that he will have an accident within a year. If he does have an accident, his SUV is worthless
What is Andrew's expected wealth? A) $30,000 B) $27,000 C) $20,000 D) zero
Rich country to poor country migration is relatively uncommon
Indicate whether the statement is true or false
Consider two Cournot competitors selling complementary goods with demand curves given by:
p1 = 100 - q1 + .5q2 p2 = 100 - q2 + .5q1 Suppose each firm has a marginal and average cost of $10. a. What about the demand equations indicate that these goods are complements? How do they differ from the standard Cournot model? b. Find the equilibrium prices and quantities. c. Suppose the two firms merge. By doing so, the newly merged firm will act to maximize the joint profits ((q1,q2 ) = 1(q1,q2 ) + 2(q1,q2 )). Find the joint-profit maximizing price and quantities. d. Are the combined profits greater or smaller from merging? That is, is merging profitable for the firms? e. Are consumers better or worse off with the firms merging? How does this compare to the mergers of Cournot competitors selling substitutes? What does this imply about antitrust policy towards mergers of firms selling complementary goods (such as airplanes and engines, computers and processors, cars and tire companies, etc).