With expected inflation equal to zero in the model, investment activity for an economy is:
a. a positive function of the nominal rate of interest.
b. a negative function of the nominal rate of interest.
c. constant in the face of differing nominal rates of interest.
d. limited to the rate of growth of nominal GDP minus the inflation rate.
Ans: b. a negative function of the nominal rate of interest.
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Output in the long run is determined by which of the two following factors when an economy operates at full employment?
A) capital and supply B) capital and labor C) the "real" GDP and purchases D) imports and exports
The convergence theory suggests:
A. that poorer countries will grow faster than rich ones. B. all countries eventually will experience the same rate of growth. C. countries may have the same rate of growth but differing levels of income. D. All of these are true.
Five of the 12 members of the Federal Open Market Committee (FOMC) must be _____.
(A) Bank presidents from Federal Reserve Districts. (B) From the Federal Advisory Council (FAC). (C) Appointed by the chair of the Board of Governors. (D) Elected by the Board of Governors.
The government imposes a tax on an industry that produces goods creating a negative externality. Yet the industry produces more than the optimum quantity of output. This means
A) the tax is more than the external cost associated with the product. B) the tax is less than the external cost associated with the product. C) the company should advertise the product more. D) the company should increase the production of the product.