Overall limits on an economy's ability to use capital are its
a. absorptive capacity
b. budget deficit
c. capital flight
d. disequilibrium interest rate
e. all of the above
A
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If the consumption function can be described as C = 200 + .80Y, the marginal propensity to save is equal to
A) -0.80. B) 0.80. C) 0.20. D) 200.
When a production function is graphed with Real GDP on the vertical axis and labor on the horizontal axis, a rise in labor ________________________, and a rise in the technology coefficient __________________
A) shifts the production function upward; also shifts the production function upward B) moves us up along a given production function; shifts the production function upward C) shifts the production function downward; shifts the production function upward D) shifts the production function upward; moves us up along a given production function
The Leontief paradox would be used to explain which of these situations?
What will be an ideal response?
Consider the Taylor rule for the target of the federal funds rate. Suppose the equilibrium real federal funds rate is 2 percent, the target rate of inflation is 3 percent, the current inflation rate is 3 percent, real GDP equals potential real GDP, and
the weights are 1/2 for the inflation gap and the output gap. Using the Taylor rule, what does the target for the federal funds rate equal? Next, if the Federal Reserve lowered the target for the inflation rate to 1 percent, how much would the target for the federal funds rate change? What will be an ideal response?