Which of the following correctly defines the term "equilibrium"?
A) It refers to analysis that uses data to arrive at conclusions.
B) It refers to a situation where all agents are simultaneously optimizing.
C) It refers to an optimizing decision made by an individual economic agent.
D) It refers to government intervention that efficiently allocates scarce resources.
B
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If an individual is maximizing his or her utility, his or her marginal rate of substitution of leisure hours for consumption will be:
a. equal to one divided by his or her wage rate. b. greater than one divided by his or her wage rate. c. equal to his or her wage rate. d. less than his or her wage rate.
Frictional unemployment is the result of
What will be an ideal response?
A federal funds rate reduction that is caused by monetary policy will:
A. increase the prime interest rate. B. decrease the size of the monetary multiplier. C. increase the Fed's discount rate. D. decrease the prime interest rate.
If the expected inflation rate was 2.5%, the expected real interest rate was 4.0%, and the real interest rate turned out to be 5.1%, then the nominal interest rate equals
A. 1.4%. B. 6.5%. C. 2.6%. D. 1.5%.