The income effect is the
A) increase in the interest rate caused by an increase in Real GDP.
B) increase in the interest rate due to a higher expected inflation rate.
C) decrease in the interest rate due to an increase in the supply of loanable funds.
D) change in national income brought about by a change in interest rates.
E) rate of change in national income brought about by a change in the supply of money.
A
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A firm in a competitive industry faces the following short-run cost and revenue conditions: ATC = $16; AVC = $8; and MR = MC = $12. This firm should
A) expand production and keep price constant. B) decrease production and raise its price. C) shut down. D) continue to operate at the same price and output level in the short run.
Subtracting the inflation rate from the nominal rate of interest tells you the:
A. nominal rate of return. B. real interest rate. C. real rate of inflation. D. price level of the economy. AACSB: Analytical Thinking