A financial bubble starts to inflate when:
A. investors become irrationally pessimistic that an asset needs to be sold immediately.
B. investors become irrationally optimistic that an asset's price will continue to rise.
C. inflation begins to accelerate, and monetary and fiscal policy are ineffective at slowing its growth.
D. a good experiences an unexplained rise in demand increasing its price.
Answer: B
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Consider two individuals, Ozzy and Sharon, who produce toy boats and yoyos. Ozzy's and Sharon's hourly productivity are as follows:
Yoyos /hour Toy boats /hour Ozzy 12 4 Sharon 10 5 Who has the absolute advantage or comparative advantage in the production of yoyos or boats?
The distinction between real and nominal shocks is that
A) real shocks directly affect only the IS curve, but not the FE line or LM curve. B) real shocks directly affect only the FE line, but not the LM curve. C) real shocks directly affect only the IS curve or the FE line, but not the LM curve. D) real shocks have a large direct effect on the IS curve and the FE line, but only a small direct effect on the LM curve.