The short run is a period of time during which:
a. there is an expansionary gap that cannot be corrected using the passive approach.
b. actual output equals potential output
c. there is a recessionary gap that cannot be corrected through discretionary policy.
d. resource buyers and sellers cannot adjust fully to changes in the price level.
e. resource buyers and sellers can adjust fully to changes in the price level.
Answer: d. resource buyers and sellers cannot adjust fully to changes in the price level.
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Which of the following countries successfully combated hyperinflation only to lapse back in to hyperinflation in 2002?
A) Brazil B) Canada C) Mexico D) Argentina
Suppose the population falls by 1 percent. For the standard of living to rise
a. nominal GDP can fall by as much as 1 percent b. nominal GDP must grow by at least 1 percent c. real GDP must grow by at least 1 percent d. real GDP must fall by at least 1 percent e. nominal GDP must fall by more than 1 percent
How would each of the following affect Cheryl Shirker's current consumption and saving? Cheryl is a forward-looking consumer with no borrowing constraints.(a)Cheryl's firm announces a reorganization plan, increasing Cheryl's future income dramatically.(b)Cheryl's father, who had planned to leave her a large bequest, must spend all his wealth on medical bills after a prolonged illness.(c)The real interest rate rises from its original level. Cheryl originally planned to have no assets for the future; that is, she planned to spend all her original assets and all her income when she was young, and planned to consume an amount equal to her future income when she was old.
What will be an ideal response?
The nominal interest rate on taxable bonds is 8%, while on municipal bonds (which aren't taxable) it is 5%. The expected inflation rate is 3% and the tax rate on interest income is 40%. Calculate the expected real after-tax interest rate on both bonds. Which would be the better investment? Now suppose the actual inflation rate turned out to be 6%. Which bond was the better investment? Would your answer change if inflation had turned out to be 0%?
What will be an ideal response?