Suppose the domestic interest rate is 3% and that the foreign interest rate is 6%. And finally, assume that the domestic currency is expected to appreciate by 4% during the coming year. Given this information, we know that
A) individuals will only hold domestic bonds.
B) individuals will only hold foreign bonds.
C) individuals will be indifferent about holding domestic or foreign bonds.
D) the interest parity condition holds.
A
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Starting from long-run equilibrium, a large decrease in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; lower; potential B. expansionary; higher; potential C. recessionary; lower; potential D. recessionary; lower; lower
Refer to Figure 4-18. What is the size of the unit tax?
A) $8 B) $5 C) $3 D) cannot be determined from the figure
Labor demand is more elastic the greater the elasticity of substitution between labor and capital because
A. a firm's technology is slow to change. B. firms always have the option of substituting capital for labor. C. the firm's output price falls when the firm produces more output. D. a firm is less willing to pay higher labor costs if it is easy for the firm to substitute capital for labor. E. workers supply more labor when their wage increases.
When the growth rate of the labor force is faster than the growth rate of the unemployed, the unemployment rate is falling.
Answer the following statement true (T) or false (F)