Consider two similar economies hit by the same temporary negative supply shock. In the economy with the more credible monetary policy, there will be ________
A) smaller increases in both inflation and the real interest rate
B) a smaller increase in inflation and larger increase in the real interest rate
C) a smaller increase in inflation and larger decrease in output
D) a smaller increase in output and larger increase in the real interest rate
A
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Suppose the current level of output is 5000. If the elasticities of output with respect to capital and labor are 0.3 and 0.7,
respectively, a 10% increase in capital combined with a 5% increase in labor and a 5% increase in productivity would increase the current level of output to A) 5015. B) 5325. C) 5575. D) 6000.
George buys an antique car for $20,000 and sells it five years later for just over $24,000. George's per-year rate of return is:
A. 20 percent. B. 12 percent. C. 10 percent. D. 4 percent.