A winter ice storm has paralyzed the entire east coast, reducing productivity sharply. This supply shock shifts the marginal product of labor curve
A) up and to the right, raising the quantity of labor demanded at any given real wage.
B) down and to the left, reducing the quantity of labor demanded at any given real wage.
C) up and to the right, reducing the quantity of labor demanded at any given real wage.
D) down and to the left, raising the quantity of labor demanded at any given real wage.
B
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More borrowing by firms in the domestic currency is one way to reduce currency mismatch. What would be the major issue if government insured repayment of the loans at a low cost?
A) There would be lots of new borrowing, and the production sector might not be able to keep pace. B) It would be too expensive. C) There could be a moral hazard problem with excessive risk taking. D) It is likely that no new borrowing would take place—firms need the incentive of tax breaks.
If the interest rate increases from 5 percent to 7 percent, the present value of a future payment
A) rises. B) falls. C) is unaffected. D) might either rise or fall.