In the years leading up to the financial crisis of 2008–2009, the market for housing can be best described as booming, driven by rising prices and increased demand due to low interest rates. stagnant, with no large variation in growth rates. booming, driven primarily by increased demand due to rising interest rates. crashing, as housing demand had declined severely since the early 1990s.

All of the following are reasons that spending on durable goods is volatile except durable goods are long-lived. good substitutes exist for durable goods. high prices make durable goods risky purchases. the purchase of durable goods is not affected by interest rates.

Suppose the economy is experiencing a recession. If the Federal Reserve enacts expansionary monetary policy, interest rates will likely Multiple Choice   rise causing investment to increase.   fall causing investment to increase.   fall causing investment to decrease.   rise causing investment to decrease.

This case explores the international expansion of Tata Motors. The Indian multinational exports cars and other vehicles worldwide under its Tata Motor Cars, Jaguar Land Rover, Tata Daewoo, and Tata Hispano brand names. Tata Motors wants to double its exports within two years, with a particular emphasis on expanding its exports to the Middle East, Africa, Asia Pacific, and Latin America. Exports are important to Tata Motors both as a means of expanding sales and as a way to offset cyclical sales patterns in India. Tata Motors is recognized as a major player in the production of buses producing a wide range of vehicles in various sizes and levels of luxury. The company currently exports its buses to more than 40 countries. In addition to buses, Tata Motors also produces and exports other vehicles including cars, premium buses, pickups, and small commercial vehicles. Going forward, Tata Motors wants to build its global presence across all vehicle classes. Indeed, Tata Motors developed its…

The real-balances effect refers to the effect that a change in interest rates has on the real value of wealth. True or False True False

which of the following is NOT correct with respect to the Efficient Market Hypothesis?   If markets are semi-strong form efficient, then fundamental analysts would not be able to earn abnormally good returns, after considering the risk they assume Semi-strong form efficiency says that if a company announces a labor strike, the stock price very quickly adjusts downward Evidence suggests that markets are NOT strong form efficient, since insiders could make abnormally good returns trading on private information. However, that is illegal Semi-strong form efficiency says that when Stryker makes an earning announcement, the stock price quickly reflects the new information Weak form efficiency says that technical analysts who study charts of stock prices and volumes can regularly make abnormally good returns, after considering the risk the assume

Short-term interest rates: fluctuate widely, depending on their terms. tend to move together. always move in the same direction as long-term interest rates. are always above long-term interest rates.

What happened first was a major policy-induced supply shock. The lockdown forced firms in several directly affected sectors, from restaurants to hotels to airlines, to halt (or at least to drastically decrease) supply. In contrast to other supply shocks analyzed earlier in the book, many firms had no choice other than to stop or decrease production. As a result of sharply lower output, and thus lower income, and of increased uncertainty, this shock had a major effect on demand, not just in the sectors directly affected by the lockdown, but also in the non-affected sectors. Thus, the outcome was a combination of a supply shock and a sharp demand response. In that context, the role of macroeconomic policy was twofold. First: While it could not do much to increase output in the affected sectors, it needed to protect the firms in those sectors from going bankrupt and the workers who lost work from going hungry. Second: It needed to limit the effect of lower demand in the non-affected…

Which of the following would properly be classified as an unfavorable supply shock?   a)The interest rate decreases, spurring investment spending.   b)The government introduces a set of market reforms that strengthens property rights and makes it easier and safer for buyers and sellers to write contracts.   c)The world price of oil increases rapidly without warning and is expected to remain at the new high level for many years, making it more expensive for all firms to produce goods and services.   d)There is a technological improvement that allows firms to reduce their costs of production permanently.   e)There is an increase in government spending.

The economy of a hypothetical country has been stable for two or three years with very low unemployment. Wages have been gradually increasing during this time. Now stock market prices begin significant increases, causing peoples’ investments, such as their retirement accounts and other investments, to increase in value. People feel very good about the future and use their new-found wealth to buy things that they had been hesitant to purchase in the past. Include detailed answers to the following questions: 1. What would be the likely impact on the government budget and national debt of the use of these fiscal policy tools (taxes, government expenditure, transfer payments, and interest rates)? 2. How would the use of these fiscal policy tools stabilize the economy?