If the central bank targets the interest rate, it a. must decrease interest rates in response to an increase in money demand. b. rules out the possibility of runaway inflation. b. can lead to runaway inflation if maintained too rigidly. d. Both a and c e. Both b and c ANSWER B
Date: September 10th, 2020
The production function is concave in capital because A) the contribution to production of each additional unit of capital decreases. B) the marginal product of capital is increasing. C) the marginal product of labor is decreasing. D) the cost of loans increases with their quantity. ANSWER A
Date: September 10th, 2020
Assuming that money demand is completely interest insensitive, the a. LM schedule will be horizontal. b. LM schedule will be vertical. c. IS schedule is vertical. d. IS schedule is horizontal. ANSWER B
Date: September 10th, 2020
In the short run, if current output remains persistently above potential ________. A) inflation will rise causing a movement along the aggregate supply curve B) expected inflation will rise causing an upward shift of the aggregate supply curve C) the aggregate supply curve will shift until current output returns to its potential level D) all […]
Date: September 10th, 2020
Which of the following will increase the marginal product of labor in the labor market? a. An increase in the price level and the money wage. b. An increase in the real wage. c. A decrease in the capital stock. d. An increase in the supply of labor. ANSWER B
Date: September 10th, 2020
If a natural disaster destroys some of the capital stock, then the classical model predicts a. labor demand, real wages, and output will fall. b. labor demand and real wages will rise, output will fall. c. the labor market remains unchanged but output falls. d. None of the above ANSWER A
Date: September 10th, 2020
At the federal level, transfer payments make up ________. A) about 98 percent of total outlays B) about half of total outlays C) less than one percent of total outlays D) the gap between government purchases and borrowing ANSWER B
Date: September 10th, 2020
Unanticipated inflation always benefits somebody, so the overall cost cannot be higher than it is for anticipated inflation. Comment. What will be an ideal response? ANSWER It is true that mistaken expectations of inflation cause one party to a transaction to get a better deal than intended, at the expense of the other party. […]
Date: September 10th, 2020
If firm-level asymmetric information becomes more severe, then A) investment demand increases. B) investment demand decreases. C) investment demand does not change. D) it is impossible to tell. ANSWER B
Date: September 10th, 2020
Regarding fiscal policy, the new classical economists a. are in favor of stability. b. attempt to avoid excessive and inflationary stimulus. c. want to avoid erratic government deficit spending. d. All of the above e. None of the above ANSWER D
Date: September 10th, 2020
