Assume that the expectation of a recession next year causes business investments and household consumption to fall, as well as the financing to support it. If the nation has low mobility international capital markets and a fixed exchange rate system, what happens to the real GDP and net nonreserve international borrowing/lending balance in the context of the Three-Sector-Model?
a. Real GDP falls
and net nonreserve international borrowing/lending balance becomes more negative (or less positive).
b. Real GDP rises and net nonreserve international borrowing/lending balance becomes more negative (or less positive).
c. Real GDP falls and net nonreserve international borrowing/lending balance becomes more positive (or less negative).
d. Real GDP falls and net nonreserve international borrowing/lending balance falls.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.A
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Refer to Figure 28-5. Consider the Phillips curves shown in the above graph. We can conclude from this graph that
A) ceteris paribus, a fall in the rate of inflation to 5 percent will increase unemployment to 7.5 percent in the short run. B) the natural rate of unemployment in this economy is 5.5 percent. C) the expected rate of inflation in this economy is 10 percent. D) All of the above are correct.
The larger the proportion of the consumer's budget that is spent on a product, the more elastic that consumer's demand for the product will be
a. True b. False
Elvis loves steak. Suppose he values the first steak sandwich he eats at $5, the second at $4.50, and the third at $4 . If he buys the 3-for-$4 special, his consumer surplus is
a. $5 b. $4 c. $1.50 d. $9.50 e. $12
Jennifer trades her autographed picture of Hulk Hogan for Alyssa's autographed picture of Pee-wee Herman, and both are happy with the exchange. This is an example of
A. Pareto optimality. B. general equilibrium. C. partial equilibrium. D. voluntary exchange.