When a price shock has occurred, inflation returns to its pre-shock rate ________. A) in the period following the price shock B) in the period when output has returned to its pre-shock rate C) once the output gap has returned to zero D) only in the long run E) none of the above ANSWER […]
Date: September 10th, 2020
Keynes believed that the instability in income was caused by variability in a. investment. b. taxes. c. consumption and savings. d. government spending. ANSWER A
Date: September 10th, 2020
What is the argument against the use of autonomous tightening of monetary policy in response to a credit-driven asset-price bubble? What will be an ideal response? ANSWER Though a bubble may have begun with an abundance of credit seeking a profitable use, restricting credit is unlikely to dampen enthusiasm for assets that are “known” […]
Date: September 10th, 2020
A production function relates a. the level of output to the level of technology. b. the price level to the level of aggregate output. c. aggregate output to the level of inputs and technology. d. aggregate demand to aggregate supply. ANSWER C
Date: September 10th, 2020
The intuition behind the slope of the LM curve is that a. as the interest rate increases, the money supply increases and income increases. b. as the interest rate increases, investment and income decreases. c. as income increases, money demand increases which increases interest rates. d. as income increases, money demand decreases which decreases interest […]
Date: September 10th, 2020
The idea that economic agents do not make systematic errors because they use all information efficiently is called the A) consistency hypothesis. B) rational expectations hypothesis. C) information efficiency hypothesis. D) principle of maximizing behavior. ANSWER B
Date: September 10th, 2020
The rational expectations hypothesis means that A) economic agents can predict the future. B) economic agents do not make systematic errors. C) everyone expects everyone else to act rationally. D) economic agents reason with expectations. ANSWER B
Date: September 10th, 2020
Which of the following are not included in the consumption component of gross domestic product? a. Purchases of stocks and bonds. b. Consumer durable goods c. Nondurable consumption goods d. Consumer services ANSWER A
Date: September 10th, 2020
Next period’s capital is equal to current-period investment A) plus the amount of current capital left over after depreciation. B) minus the amount of current capital left over after depreciation. C) plus the amount of current period depreciation. D) minus the amount of current period depreciation. ANSWER A
Date: September 10th, 2020
The money demand curve shifts to the right when a. there is an increase in the riskiness of interest-bearing assets. b. there is a decrease in the interest rate. c. income decreases. d. income increases. e. both a and d. ANSWER E
Date: September 10th, 2020
