Reunification of East and West Germany created which sequence of events?
I. an increase in German rates of interest
II. a boom in German output and a shift to the right of the German IS curve
III. large reunification costs financed by increased government spending
IV. an increase in rates of interest in ERM nations
A) IV, I, III, I
B) III, II, I, IV
C) I, II, III, IV
D) IV, III, II, I
Ans: B) III, II, I, IV
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A person who is risk averse might accept a 50% chance of losing $100 today in exchange for a 50% chance of winning $125 in two years if the interest rate was
a. 9% but not 10% b. 10% but not 11% c. 11% but not 12% d. None of the above is correct; a risk averse person would not accept any of the above bets.
________ occurs when economic benefits are distributed fairly
A) Productive efficiency B) Allocative efficiency C) Equality D) Equity