Assume that the expectation of declining housing prices cause households to reduce their demand for new houses and the financing that accompanies it. If the nation has low mobility 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 rises, and real GDP remains the same.
c. The real risk-free interest rate and real GDP remain the same.
d. The real risk-free interest rate falls, and real GDP falls.
e. There is not enough information to determine what happens to these two macroeconomic variables.
.D
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Which of the following statements would make a reasonable hypothesis to test?
A) Deflation is worse than inflation in any economy. B) An unemployment rate below 4% is bad for the economy. C) As tax rates increase, eventually tax revenues will decline. D) Higher real GDP per capita figures lead to happier citizens.
Firms in oligopoly often behave like the prisoners in the prisoners' dilemma, carefully anticipating the moves of their rivals in an uncertain environment
a. True b. False Indicate whether the statement is true or false