The cost-output elasticity is used to measure
A) input substitution flexibility.
B) the slope of the firm's expansion path.
C) the slope of long-run average cost.
D) the slope of long-run marginal cost.
E) economies of scale.
E
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If the Fed increases the money supply,
a. the interest rate increases, which tends to raise stock prices. b. the interest rate increases, which tends to reduce stock prices. c. the interest rate decreases, which tends to raise stock prices. d. the interest rate decreases, which tends to reduce stock prices.
Answer the question on the basis of the following information. Assume that if the interest rate that businesses must pay to borrow funds were 20 percent, it would be unprofitable for businesses to invest in new machinery and equipment, so investment
would be zero. But if the interest rate were 16 percent, businesses would find it profitable to invest $10 billion. If the interest rate were 12 percent, $20 billion would be invested. Assume that total investment continues to increase by $10 billion for each successive 4 percentage point decline in the interest rate. Refer to the information. Which of the following correctly expresses the indicated relationship as an equation? A. i = 20 - 4I. B. i = 20 - .4I. C. i = 24 - .4I. D. i = 20 - 10I.