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Economics
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2 Nov 2020

3.  Investment is the

a. Net addition made to the nation's capital stocks

b. person's commitment to buy a flat or a house

c. employment of funds on assets to earn returns

d. employment of funds on good and services that are used for production purpose

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Microeconomics
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Explaining Households Supply of Financial Capital
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Raushan Raj
Raushan RajLv8
2 Nov 2020

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Related questions

In a speech in 2017, Fed Chair Janet Yellen described the long-run federal funds rate that is consistent with achieving the Fed's mandate of high employment and price stability as the "neutral rate," which she estimates to be about 3 percent. Yellen noted that: "Waiting too long to begin moving toward the neutral rate could risk a nasty surprise down the road long dash either too much inflation, financial instability, or both. In that scenario, we could be forced to raise interest rates rapidly, which in turn could push the economy into a new recession."

Source: Janet Yellen, "The Goals of Monetary Policy and How We Pursue Them," Speech at the Commonwealth Club, San Francisco, California, January 18, 2017.

Why is it potentially a problem for the Fed to "wait too long" to raise its target for the federal funds rate? Can't the Fed just wait until inflation increases and begin to slowly increase the target at that time?

A. Monetary policy works with a lag that can be up to 18 months.

B. Prices change slowly due to menu costs.

C. Legislation takes time to implement.

D. Consumers are irrational.

Why might interest rates that are too low lead to financial instability?

A. Interest rates that are too low could result in higher unemployment.

B. Rates that are too low could lead to speculative bubbles in stocks and other financial assets.

C. Low-interest rates could lead to deflation.

D. Rates that are too low could lead to a situation of hyperinflation.

Why might the Fed rapidly increasing its target for the federal funds rate push the economy into recession?

A. In this situation, increasing the target for the federal funds rate increases aggregate demand by increasing investment.

B.A rapidly increasing federal funds rate target would decrease employment by lowering wages.

C.The Fed rapidly increasing its federal funds' rate target increases unemployment by increasing net exports.

D.Increasing the target for the federal funds rate decreases GDP by reducing consumption.

1.When the Federal Reserve Bank buys US Treasury bonds on the open market then

A-

then the money supply decreases, interest rates decline, gdp increases, and employment decreases
B-

the money supply increases, interest rates increase, gdp decreases, and employment increases
C-

the money supply decreases, interest rates increase, gdp decreases, and employment decreases
D-

the money supply increases, interest rates decline, gdp increases, and employment increases

2. Countries can increase their welfare by engaging in specialization in production and international trade based on their:

a-relative levels of GDP

b-absolute advantage

c-comparative advantage

d-relative exchange rates

3. Short-run marginal cost of a good generally:

a-

intersects the maximum points of both the average variable cost and the average total cost curves
b-

falls for a time, but then begins to rise when the point of diminishing returns is reached.
c-

is defined as the difference between total cost and total variable cost.
d-

are based on total fixed costs.

True or False Questions:

1. Recessionary Expenditure Gap- Aggregate expenditures by which aggregate expenditures at the full employment GDP falls short of those required to achieve full employment GDP.

2. Private Closed Economy- An economy that includes consumer, business, and government segments of the economy.

3. Lump-sum taxes- A tax of a constant amount so the government obtains the same amount of tax at each level of GDP.

4. Aggregate Supply schedule- A relationship between a nation's price level and the amount of real domestic output that is produced.

5. Real Rate of Interest effect- The Nominal Rate of Interest earned on a project.

6. Savings- savings are planned investments by the consumer.

7. Wealth effect- The dollar amount of all the assets owned minus the dollar amount of all the liabilities or debt.

8. Savings Schedule - GDP less investment = savings

9. Aggregate Demand Schedule- a schedule that shows the amount of a nation's output (real GDP) that buyers desire to purchase at each price level.

10. Productivity- The measure of the level of the nation of real output and the amount of resources used to produce the output, less labor cost.

11. Multiplier effect- Measures the change in GDP to spending.

12. Injection- Investment by private business into the economy for capital goods is and injection into the economy.

13. Consumption schedule- The measurement of Disposable income less savings.

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