Assume that a traffic ticket attorney is no more productive today than he was 10 years ago but he is now earning 50% more in salary. How do you explain this apparent paradox?
What will be an ideal response?
Attorneys, like anyone else in the labor market earns a wage that is in line with his marginal revenue product, not his marginal productivity. Even if his productivity has been flat over the last 10 years the price of his services has probably gone up. Over time, as the economy expands, wages and incomes rise and people are likely to have a greater ability and willingness to pay more for these services.
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According to the Taylor rule, if there is a recessionary gap of 2 percent of potential output and inflation is 4 percent, what real interest rate will the Fed set?
A. 0.015 B. 0.025 C. 0.03 D. 0.02
A commercial bank has required reserves of $60 million and the reserve ratio is 20%. How much are the commercial bank's checkable-deposit liabilities?
A. $1,200 million B. $120 million C. $300 million D. $900 million
If expected profit falls, the demand for loanable funds curve shifts ________, and the real interest rate ________
A) leftward; does not change B) leftward; rises C) leftward; falls D) rightward; falls E) rightward; rises
The first step in economic analysis is to
a. explore how the equilibrium changes if the constraints change. b. make explicit assumptions about the desirability and the cost of various alternatives. c. apply the equimarginal principle to the problem being considered. d. determine how agents' constraints are interrelated.