How do economists with monetarist leaning explain the cause of the financial crisis that led to the severe recession of 2007–2008?
What will be an ideal response?
In the view of economists with monetarist leanings, a major factor contributing to the financial crisis was that the Federal Reserve held interest rates too low for too long as it tried to counter the lingering effects of the 2001 recession. The low interest rates helped make house buying too attractive, thus creating a housing bubble. When the housing bubble burst, it led to a mortgage default crisis that caused financial and economic problems throughout the economy. These problems led to a decline in aggregate demand that became severe enough to be a recession. From this perspective, the main cause of the recession has monetary origins in the actions of the Federal Reserve.
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A decrease in the real interest rate leads to
A) an increase in investment demand so that the demand for loanable funds curve shifts rightward. B) a fall in the capital stock. C) an increase in the expected profit. D) a movement downward along the demand for loanable funds curve.
Suppose an economics forecaster discovers that on days when the sunspot count is high stock market on the following day is bullish, that is stock market prices edge upwards
In addition, he also observes that on days with a low sunspot count the following day the stock market tends to be bearish, that is stock market prices tend to fall. The forecaster then concludes that there is a positive relationship between the sunspot count and stock market prices and proceeds to base his investment decisions on this premise. What kind of an error has this forecaster made?
More than 50% of the elderly receive private pensions
Indicate whether the statement is true or false
Suppose the fixed cost of building a nuclear power plant is $1 billion. Suppose also that the only variable cost is the labor of Homer Simpson, and he earns $10 per hour. If the plant generates 1,000 kilowatts each hour, and has already generated 1 billion kilowatts, what can you say about the marginal cost of the next kilowatt?
a. b and e. b. The marginal cost is equal to $.01. c. The marginal cost is equal to $1.01. d. The marginal cost is rising. e. The marginal cost is falling.