Assume that foreign capital flows into a nation rise due to expected increases in stock market appreciation. If the nation has highly mobile international capital markets and a fixed exchange rate system, what happens to the real risk-free interest rate and real GDP in the context of the Three-Sector-Model?
a. The real risk-free interest rate rises and real GDP falls
b. The real risk-free interest rate falls and real GDP rises.
c. The real risk-free interest rate rises and real GDP remains the same.
d. The real risk-free interest rate and real GDP remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.B
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The concept that an additional dollar of expenditures will result in the creation of more than one dollar's worth of real GDP is called
A. the multiplier effect. B. economic growth. C. the business cycle. D. fiscal policy.
If a firm is price differentiating, then it is
A) producing a homogeneous product. B) charging different prices to different consumers based on differences in marginal costs. C) charging different prices based on quality. D) charging different prices based on advertising costs.
Tom and Jerry have two tasks to do all day: makedishes and build fences. If Tom spends all day makingdishes, he will have make 16 dishes. If he instead devotes his day to building fences, Tom will build 4 fences. If Jerry spends his day makingdishes, he will make 14 dishes; if he spends the day building fences, he will build 7 fences. After looking at the production possibilities for both Tom and Jerry, we can conclude that:
A. Tom has the comparative advantage in dish production. B. Jerry has the comparative advantage in dish production. C. Tom has the comparative advantage in fence production. D. No comparative advantage exists.
A new major league baseball expansion team is moving to your town. It will inject spending worth $40 million into your local economy initially. The Chamber of Commerce predicts that this will generate a total of $500 million in additional income for your town. The team owners think that this is an underestimate. What do you need to know to figure out who is right? Explain