Suppose favorable weather conditions temporarily raise the marginal productivity of existing capital. Weather conditions are expected to return to normal next year, so there is no change in the expected marginal productivity of future capital. In this situation, the interest rate will
a. rise.
b. fall.
c. remain unchanged.
d. react unpredictably.
b. fall.
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The equilibrium level of GDP is always accompanied by full employment and stable prices
a. True b. False Indicate whether the statement is true or false
Which is the most accurate statement?
A. If most economists had to choose between a tariff and a quota, she or he would choose a tariff as the lesser of two evils. B. Both tariffs and quotas are basically good for our economy because they keep out foreign imports. C. Tariffs and quotas are equally bad for our economy. D. Most economists prefer import quotas to tariffs.
Holding all else constant, an increase in U.S. real GDP will ________ the supply for dollars in the foreign exchange market and ________ the equilibrium Mexican peso/U.S. dollar exchange rate.
A. increase; increase B. decrease; increase C. decrease; decrease D. increase; decrease
Economists make simplifying assumptions to
A) understand extremely complex phenomenon. B) build a model that is as close to the real world as possible. C) focus on the variables that are important to an economic theory. D) A and C