According to Ricardian equivalence advocates, if the government announces a plan to balance the budget by reducing its deficits to zero, then the private sector will:
A. decrease consumption.
B. decrease investment.
C. increase savings.
D. decrease savings.
Answer: D
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If the Fed wants to lower the nominal interest rate in the short run, the Fed ________ the growth rate of the quantity of money
A) raises B) lowers C) first lowers and then raises D) does not change E) None of the above answers is correct because the premise of the question is wrong since the Fed cannot affect the nominal interest rate, only the real interest rate.
A key to analyzing subgame perfect equilibrium strategy in sequential games is
a. predictable behavior b. an explicit order of play for at least some participants c. information sets that are known with certainty d. credible threats clearly communicated e. randomness
Barriers to entering an industry:
A. encourage allocative efficiency. B. encourage productive efficiency. C. are the basis for monopoly. D. apply only to purely monopolistic industries.
If a restaurant was a natural monopoly, dividing the restaurant equally into two separate restaurants would
A) decrease marginal cost. B) raise average total cost. C) increase total revenue. D) make marginal revenue less elastic.