Category: Economics

What is a flow from firms to households in the circular flow model?
Select one:
Tax payments
Final goods and services
Intermediate goods and services purchased by firms

the actual price is either above or below the equilibrium price then less will be sold in the market than if the actual price is equal to the equilibrium price True False
True
False

➤ When might a lower interest rate NOT lead to currency depreciation?
Lower rates may not depreciate the currency when investors expect faster growth, tighter fiscal policy, or lower inflation in Country A. Strong capital controls, official foreign-exchange intervention, or safe-haven demand can also support the currency. If rate cuts are fully anticipated and offset by other positive factors, the exchange rate can remain stable or even strengthen.

Suppose a firm’s total cost function is -TC=98+7Q-8Q2+10Q3, where Q>0Calculate the marginal cost of the firm. Now, calculate the derivative of the marginal costfunction.

➤ Can a consol’s price be infinite or undefined?
If the interest rate equals zero, the formula P = C/r is undefined and the price would diverge to infinity for any positive coupon. For the price formula to be meaningful, the yield must be positive. Negative yields produce mathematically large or sign-flipped values and contradict standard discounting assumptions.

➤ How have FDI shares shifted between developing and developed economies over time?
Since the 1990s, developing economies have increased their FDI share as firms pursued growth, cost advantages, and expanding consumer markets. Emerging markets in Asia and Latin America drew manufacturing and services investment. The trend is uneven: some periods show developing economies closing the gap, but high‑income countries remain significant recipients and financiers of large capital flows.

Using the Fisher equation, explain how changes in expected inflationinfluence nominal interest rates. How do central banks use this relationship intheir policy decisions?

Discuss the concept of price stickiness in modern macroeconomic models.How does price stickiness impact the effectiveness of demand managementpolicies during a recession?