During the financial crisis of 2007-2008, the U.S. central bank lowered its policy rate from 5.25% to 0%. What was the effect on market rates of interest?
a. Market rates increased by 5%.
b. Market rates fell by 5%.
c. Market rates fell below zero.
d. Market rates barely moved at all.
Ans: d. Market rates barely moved at all.
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The hot spot problem is:
a. the U.S. obtains the majority of its oil supplies from politically unfriendly countries. b. some air pollutants such as sulfur dioxide have a greater effect nearby than further away. c. some air pollutants such as carbon dioxide have an equal effect nearby and further away. d. nuclear plants heat up nearby water, causing a decline in the native fish population.
Suppose you are producing where MC = AVC = $3 and this is loss minimizing. If market reports predict that the price of your product will reach a long-run equilibrium level that is $4 higher than it is today, you should
a. increase output in advance of the expected price increase b. remain in business c. shut down d. remain in business only if your most efficient production level has an average total cost less than or equal to $7 e. shut down until the price increases, then get back in business