The Central Bank of Baltonia decided to lower the interest rate that banks use to make loans to each other when the growth rate of Baltonia's output fell. What will be the effect of this policy on Baltonia's economy?
What will be an ideal response?
If the Central Bank of Baltonia decides to lower the interest rate that banks use to make loans to each other, banks will make more loans. If banks make more loans, the availability of credit will increase and the interest rate will fall. This will lead to an increase in investment. As a result, output and employment will increase.
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Vertical equity incorporates the notion that
A. those earning higher incomes should pay more in taxes. B. those earning equal incomes should pay the same in taxes. C. taxes paid should be unassociated with income levels. D. there should be no excess burden created by a tax.
Which of the following will cause an inward shift in the demand for steaks at a restaurant?
a. A report by the American Medical Association states that the consumption of steak reduces the risk of cardiovascular disease b. A 50 percent reduction in the price of steaks c. A double-digit increase in the price of chicken d. A recession leading to a significant fall in the income levels of consumers e. The expectation that the price of steaks will double within two months
In choosing among alternative courses of action, Raj must consider how others might respond to the action he takes. In the language of game theory, we say that Raj must think
a. openly. b. strategically. c. dominantly. d. cooperatively.
The production possibilities curve for two products is bowed out because
A. the qualities of the resources are not identical. B. there are unemployed resources. C. as the production of a good increases, opportunity cost is unchanged. D. as the production of a good increases, opportunity cost increases.