Suppose there is an oil supply shock to the U.S. economy due to an embargo by major oil producing nations. According to the real business cycle theory, the supply shock will, other things being equal
A) cause economy-wide deflation.
B) cause real Gross Domestic Product (GDP) to decline both in the short run and in the long run.
C) push the economy into an expansionary phase of the business cycle.
D) push real Gross Domestic Product (GDP) upward in the short run but downward in the long run.
B
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Suppose in 2001, nominal GDP in Russia was 1000 rubles. If 2000 is the base year and the GDP deflator for 2001 was 0.50 (highly unlikely as is the GDP of 1000 rubles!), Russia's real GDP in 2001 was
a. –1,000 rubles b. 10,000 rubles c. 500 rubles d. 1000 rubles e. 2000 rubles
If the marginal benefit of reducing water pollution is constant at $10 per ton, then it is efficient to reduce water pollution:
A. to zero. B. until the marginal cost of reducing water pollution equals $10 per ton. C. as long as the marginal cost of reducing water pollution is greater than $10 per ton. D. to whatever level the market determines.