Assume that the government increases spending and finances the expenditures by borrowing in the domestic capital markets. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to the real risk-free interest rate and reserve-related (central bank) transactions in the context of the Three-Sector-Model?
a. The real risk-free interest rate rises, and reserve-related (central bank) transactions become more positive (or less negative).
b. The real risk-free interest rate rises, and reserve-related (central bank) transactions become more negative (or less positive).
c. The real risk-free interest rate rises, and reserve-related (central bank) transactions remain the same.
d. There is not enough information to determine what happens to these two macroeconomic variables.
e. The real risk-free interest rate falls, and reserve-related (central bank) transactions become more negative (or less positive).
.C
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The figure above provides information about Light-U-Up Utilities, which is a natural monopoly that provides electricity. If Light-U-Up is regulated, what is its economic profit if it must follow an average cost pricing rule?
A) -$60 B) -$20 C) $0 D) $30
When the economy suffers a temporary negative supply shock and the monetary policy makers try to stabilize economic activity in the short run, then
A) aggregate demand curve shifts rightward. B) output will be at its potential. C) inflation rate will be higher. D) all of the above. E) both A and B.
Refer to Figure 7.1. At output level Q1
A) marginal cost is falling. B) average total cost is falling. C) average variable cost is less than average fixed cost. D) marginal cost is less than average total cost. E) all of the above
Ken and Traci are two woodworkers who both make tables and chairs. In one month, Ken can make 3 tables or 18 chairs, whereas Traci can make 8 tables or 24 chairs.. Given this, we know that
a. Ken has an absolute advantage in chairs. b. Ken has a comparative advantage in tables. c. Traci has an absolute advantage in chairs. d. Traci has a comparative advantage in chairs.