Explain the relationship between relative prices and the slope of a country's production possibilities frontier
What will be an ideal response?
Under perfect competition, the two slopes will be equal. This insures that production occurs at the point where price equals marginal cost.
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The simple circular-flow diagram is a model that includes only some key players in the real economy. Which of the following key players are omitted from the simple circular-flow model?
a. households b. firms c. government d. markets for factors of production
The linear probability model always contains heteroskedasticity when the dependent variable is a binary variable unless all of the slope parameters are zero.
Answer the following statement true (T) or false (F)
Suppose the growth rate of the firm's profit is 5 percent, the interest rate is 6 percent, and the current profits of the firm are $100 million. What is the value of the firm?
A. $111.5 million B. $10,600 million C. $1,766.6 million D. None of the statements associated with this question are correct.
Assume that the central bank lowers the discount to increase the nation's monetary base. If the nation has highly mobile international capital markets and a fixed exchange rate system, what happens to the nominal exchange rate and monetary base in the context of the Three-Sector-Model? State your answer after the macroeconomic system returns to complete equilibrium
a. The nominal exchange rate rises and monetary base rises. b. The nominal exchange rate rises and monetary base falls. c. The nominal exchange rate and monetary base fall. d. The nominal exchange rate and monetary base remain the same. e. There is not enough information to determine what happens to these two macroeconomic variables.