The term "recession" describes a situation where:
A. inflation rates exceed normal levels.
B. output and living standards decline.
C. an economy's ability to produce is destroyed.
D. government takes a less active role in economic matters.
Answer: B
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DeShawn's Detailing is a service that details cars at the customers' homes or places of work. DeShawn's cost for a basic detailing package is $40, and he charges $75 for this service
For a total price of $90, DeShawn will also detail the car's engine, a service that adds an additional $20 to the total cost of the package. Should DeShawn continue to offer the engine detailing service? A) yes, but only if he raises the price of the basic detailing package B) No, his marginal benefit is less than his marginal cost. C) Yes, he still makes a profit by selling the engine detailing service with the basic detailing package. D) More information is needed for DeShawn to make this decision.
Suppose individuals now believe that there will be an increase in the future expected interest rate. This increase in the expected future interest rate will cause which of the following to occur in the current period?
A) an upward shift of the LM curve B) a leftward shift of the IS curve C) the IS curve to become flatter D) the LM curve to become steeper E) none of the above