What does the Classical model predict about the relationship between a country's budget balance (total revenue minus total spending) and a country's level of real interest rates and investment in a closed economy? Use a graph of the capital
market to illustrate.
A higher budget deficit shifts the I+(G-T) curve to the right, increasing real interest rates. Higher real interest rates lead to a reduction in the quantity demanded of investment.
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The elasticity of demand for a particular perfectly competitive firm's output is positively related to the number of firms supplying the market
Indicate whether the statement is true or false
Which of the following is an example of an inverse relationship?
A) hours of study and test grade B) calories eliminated from diet and weight loss C) beers consumed while studying and test grade D) amount of snowfall and profits of ski resorts
What is the present value of $1,000 to be received in two years if the current market interest rate is 8.0%?
a. $481 b. $556 c. $857 d. $926
Which of the following examples would most likely cause hyperinflation?
a. A nation gradually repays a large debt over a ten-year period. b. A nation increases its money supply to get out of a recession. c. A nation is given a reprieve on a large debt in return for lowering tariffs. d. A nation rapidly prints money to pay off a very large debt to another nation.