A relatively steep LM curve implies that wide fluctuations in the goods sector cause
A) wide fluctuations in real output.
B) wide fluctuations in the price level.
C) wide fluctuations in the interest rate.
D) crowding out of private investment.
C
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The largest expenditure category in the United States is
A) consumption expenditure. B) wages. C) net exports of goods and services. D) government expenditure on goods and services. E) investment.
An example of "investment" in computing real GDP using the expenditure approach is the purchase of
A) a new set of tools by an auto mechanic, for use in repairing cars. B) 100 shares of IBM stock. C) a 100 year old house by a married couple. D) computer chips by Dell to put in their personal computers.
Suppose expected inflation in the economy is 5%. Banks set nominal interest rates so they'll earn a 2% expected real return. Employers set nominal wages based on a 2% expected real wage increase
Suppose the nominal interest rate and nominal wages are determined this way, but actual inflation turns out to differ from the expected inflation rate. Calculate the actual real interest rate and the percent increase in the real wage for each of the following actual inflation rates: a) 2%; b) 5%; c) 10%.
To find the profit maximizing level of output, a firm finds the output level where
A) price equals marginal cost. B) marginal revenue and average total cost. C) price equals marginal revenue. D) all of the above E) none of the above