In the short run, when the central bank increases the quantity of money, what happens to real balances?
a. They do not change, since prices will rise by the same proportion.
b. They will fall, since prices will rise by a greater proportion.
c. They will rise, since prices overall will fall.
d. They will rise, since prices will not change in the short run.
Ans: d. They will rise, since prices will not change in the short run.
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Starting from long-run equilibrium, a large increase in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; potential B. recessionary; higher; potential C. recessionary; lower; lower D. expansionary; higher; higher
A real estate salesperson sells a house in 2015 that was built in 2005. How does this transaction get counted in the GDP statistics?
A. The price of the house and the real estate salesperson’s commission are both included in 2015’s GDP. B. Neither the price of the house nor the commission is included in 2015’s GDP. C. The real estate salesperson’s commission but not the price of the house is included in 2015’s GDP. D. The price of the house would be included in both 2005’s GDP and the GDP for 2015.
How would a decline in demand for imported commodities by the Chinese affect the market for cargo transportation to China?
A. Supply of cargo transportation shifts to the right causing an increase in demand and equilibrium quantity and a decrease in equilibrium price. B. Supply of cargo transportation shifts to the right causing an increase in quantity demanded and decline in equilibrium price. C. Demand for cargo transportation shifts to the left causing a decline in supply and equilibrium quantity and price. D. Demand for cargo transportation shifts to the left causing a decline in quantity supplied and price.
Suppose a firm manager has a base salary of $75,000 and earns 1.5 percent of all profits. Determine the manager's income, if revenues are $10,000,000 and profits are $5,000,000.
A. $300,000 B. $225,000 C. $75,000 D. $150,000