In the late 1990s, debt-financed government spending decreased in Mexico. Following this decrease, consumption spending increased. Ricardian equivalence would explain this increase in consumption as the result of:
a. people's expectation of higher future taxes required to pay off government debt.
b. people's expectation of lower future taxes that induce them to save less.
c. automatic stabilization of the economy.
d. the crowding out effect.
e. an increase in current household disposable income.
b
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In the simplest version of the Cournot model, we assume
A) the firms set price independently and simultaneously. B) the firms set price independently and sequentially. C) that the firms have identical costs. D) the firms are in a Nash equilibrium.
In the dollar-pound market, whenever there is an appreciation of the dollar, there is
a. an appreciation of the pound b. a depreciation of the pound c. a devaluation of the pound d. a revaluation of the pound e. no change in the value of the dollar
Assume that the central bank purchases government securities in the open market. 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 GDP Price Index in the context of the Three-Sector-Model?
a. The real risk-free interest rate falls, and GDP Price Index falls. b. The real risk-free interest rate falls, and GDP Price Index rises. c. The real risk-free interest rate rises, and GDP Price Index falls. d. There is not enough information to determine what happens to these two macroeconomic variables. e. The real risk-free interest rate and GDP Price Index remain the same.
According to classical economists, the relationship between the amount of funds firms invest and the interest rate is
A) direct. B) inverse. C) indirect. D) independent.