Assume that the central bank purchases government securities in the open market. If the nation has highly mobile international capital markets and a flexible 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 falls, and real GDP rises.
b. The real risk-free interest rate falls, and real GDP stays the same.
c. The real risk-free interest rate rises, and real GDP remains the same.
d. There is not enough information to determine what happens to these two macroeconomic variables.
e. The real risk-free interest rate falls, and real GDP falls.
.A
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Economic growth in the United States has increased consistently since the 1950s.
Answer the following statement true (T) or false (F)
Fiscal policy in the United States is hampered by its particularly long ________ lag
A) data B) recognition C) legislative D) transmission E) effectiveness
Consider the following pairs of goods. For which of the two goods would you expect the demand to be more price elastic? Why?
a. water or diamonds b. insulin or nasal decongestant spray c. food in general or breakfast cereal d. gasoline over the course of a week or gasoline over the course of a year e. personal computers or IBM personal computers
If the market price of a good does NOT include all of the costs and benefits that arise from the production or consumption of the good, then
A) the market is perfectly competitive. B) an externality is present. C) society is consuming and producing the optimal amount of the good. D) resources are properly allocated.