Refer to the table above. An increase in the real interest rate from 2% to 6% will:
A. Decrease the equilibrium level of GDP by $200 billion
B. Decrease the equilibrium level of GDP by $300 billion
C. Decrease the equilibrium level of GDP by $400 billion
D. Increase the equilibrium level of GDP by $400 billion
C. Decrease the equilibrium level of GDP by $400 billion
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Under perfect capital mobility
a. there are no restrictions on buying financial assets, though there may be on buying factories and equipment. b. transactions costs have to be zero. c. differential risk in assets across countries are minimal. d. All of the above e. None of the above
Refer to Goods X and Y. Suppose the consumer is spending all of his income buying some of both goods. If the marginal value of X is greater than the relative price of X, how can the consumer improve his level of satisfaction?
Assume that good X is on the horizontal axis and good Y is on the vertical axis in the consumer-choice diagram. PX denotes the price of good X, PY is the price of good Y, and I is the consumer's income. Unless otherwise stated, the consumer's preferences are assumed to satisfy the standard assumptions. a. By purchasing more of both goods. b. By purchasing more of good X and less of good Y. c. By purchasing more of good Y and less of good X. d. The consumer cannot improve his level of satisfaction because he is at the optimum.