Assume that the expectation of a recession next year causes business investments and household consumption to fall, as well as the financing to support it. If the nation has low mobility international capital markets and a fixed exchange rate system, what happens to the net nonreserve international borrowing/lending balance and the monetary base in the context of the Three-Sector-Model?
a. The
net nonreserve international borrowing/lending balance becomes more negative (or less positive) and monetary base falls.
b. The net nonreserve international borrowing/lending balance becomes more negative (or less positive) and monetary base rises.
c. The net nonreserve international borrowing/lending balance becomes more positive (or less negative) and monetary base falls.
d. The net nonreserve international borrowing/lending balance and monetary base remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.B
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A perfectly competitive firm has to charge the same price as every other firm in the market. Therefore, the firm
A) faces a perfectly elastic supply curve. B) is not able to make a profit in the short run. C) faces a perfectly inelastic demand curve. D) is a price taker.
Considering a given increase in price due to a tax, the more price elastic the supply curve is, the:
A. larger the drop in equilibrium quantity. B. smaller the drop in equilibrium quantity. C. smaller the amount of deadweight loss created. D. less surplus that is transferred to consumers.
Producer surplus measures the value between the actual selling price and the:
a. price sellers are willing to sell the product. b. deadweight loss price. c. lowest price sellers are willing to sell the product. d. profit-maximization price.
What is the drawback of analyzing only one round of effects and leaving the feedback effects unobserved?
a. Not all three markets will be analyzed. b. The qualitative effect might be offset by feedback effects. c. The quantitative effect might be overestimated or underestimated. d. All of the above