When the interest rate is low, planned investment is ________ so output is ________.
A. high; low
B. high; high
C. low; high
D. low; low
Answer: B
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Consider the following simple regression model y = 
0 + 1x1 + u. Suppose z is an instrument for x. if Cov(z,u) = 0 and Cov(z,x)
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A. 
B. 
C. Cov(z,u)
D. Cov(z,x)
When a liquidity trap situation exists, we know that
A) an open market operation will have no effect on the supply of money. B) an open market operation will have no effect on the monetary base. C) fiscal policy will have no effect on the demand for goods. D) expansionary monetary policy will be deflationary. E) none of the above
According to the above figure for a gasoline market, an increase in the price from $2 to $4 will result in
A. a shortage of 30 million gallons. B. an increase in quantity demanded of 10 million gallons. C. an increase in demand of 20 million gallons. D. an increase in quantity supplied of 20 million gallons.
The Taste Freeze Ice Cream Company is a perfectly competitive firm producing where MR = MC. The current market price of an ice cream sandwich is $5.00. Taste Freeze sells 200 ice cream sandwiches. Its AVC is $8.00 and its AFC is $3.00. What should Taste Freeze do?
A. Shut down and produce zero sandwiches because price is less than AVC. B. Continue to produce because price exceeds AFC. C. Decrease production so that AVC will decrease. D. Increase production so that AFC will decrease.