According to Keynes’ theory of money demand, a low interest rate increases the likelihood of a capital ________ and ______ the interest elasticity of money demand. a. gain on bonds; reduces. b. gain on money; increases. c. loss on bonds; reduces. d. loss on money; increases. e. none of the above. ANSWER C
Date: September 10th, 2020
In the new classical model, an anticipated increase in the money stock would cause a. the price level and level of real output to rise. b. the price level to rise with no effect on real output. c. real output to rise with no effect on the price level. d. no change in the price […]
Date: September 10th, 2020
If the MPC is 0.6, then a 50-unit rise in taxes and a 50-unit rise in government spending will shift the IS curve a. to the right by 50 units. b. to the right by 75 units. c. to the left by 125 units. d. to the left by 75 units. ANSWER A
Date: September 10th, 2020
The index that measures the change in price of a typical basket of consumer goods is a. the GDP deflator. b. the consumer price index. c. nominal GDP. d. real GDP. ANSWER B
Date: September 10th, 2020
The condition, MRSC,C’ = 1 + r, describes the representative consumer’s A) investment decision. B) consumption – savings decision. C) current period work – leisure decision. D) future period work – leisure decision. ANSWER B
Date: September 10th, 2020
The main reason that hyperinflation renders a currency worthless is that ________. A) the government cannot print money fast enough to keep up with the rising prices B) laws against raising prices are easily evaded C) reducing government expenditures is politically unpopular D) the government’s “official” inflation rate is always a gross understatement E) as […]
Date: September 10th, 2020
Which of the following best approximates Okun’s law? A) a 1 percent increase in output leads to a 2 percent decrease in unemployment B) a 1 percent increase in output leads to a 1 percent decrease in unemployment C) a 2 percent increase in output leads to a 4 percent increase in unemployment D) a […]
Date: September 10th, 2020
How did international policy coordination contribute to the avoidance of an economic depression in 2008 – 2010? What will be an ideal response? ANSWER The shadow banking system had become an important source of liquidity in the global economy prior to the crisis. The discovery that collateral was worth far less than it had […]
Date: September 10th, 2020
Compared to the central bank response to the financial crisis in 2007-2009, the response to the Great Depression of the 1930s may be characterized as ________, while the response of Japan’s central bank to the banking crisis in the early 1990s merits the label ________. A) hasty; sluggish B) intrusive; tenacious C) complacent; indulgent D) […]
Date: September 10th, 2020
The marginal propensity to consume is a. the change in consumption associated with a change in income. b. equal to the marginal propensity to save minus 1. c. equal to 1 minus the marginal tax rate. d. the change in consumption associated with a change in wealth. ANSWER A
Date: September 10th, 2020
