Consumer choice theory predicts that, with identical consumers, pay-as-you-go social security A) always makes all generations worse off. B) makes some generations better off, and cannot make any generation worse off. C) may make some generations worse off and cannot make any generation better off. D) may be Pareto improving. ANSWER D
In the Keynesian money market, velocity is a. negatively related to the interest rate. b. independent of the interest rate. c. positively related to the interest rate. d. is positively related to the money supply. e. is not related to the interest rate but income. ANSWER C
If the marginal propensity to save is equal to 0.5 in the simple Keynesian model, then a 10-unit increase in government spending will cause output to rise by a. 5 units. b. 10 units. c. 20 units. d. 25 units. e. 40 units. ANSWER C
In the classical model, what is the impact of changes in the demand for goods and services on aggregate output? Do they affect any real variables? What will be an ideal response? ANSWER Factors such as the quantity of money, the level of government spending, and the level of demand for investment goods by […]
Management of expectations by a central bank is based on the view that ________. A) decreasing the federal funds rate will lead to a reduction in the discount rate B) if economic agents believe that the price of an individual asset will rise in the future, they will buy that asset today, contributing to its […]
The proposition that the amount of goods and services produced in an economy in the long run is not affected by the price level is known as the ________. A) neutrality of money B) classical dichotomy C) quantity theory of money D) Fisher effect E) none of the above ANSWER B
Saying the consumer is rational means A) the consumer is a stand-in for all consumers. B) the consumer is getting rationed. C) the consumer makes reasonable choices. D) the consumer makes the best choices. ANSWER D
Let C = 200 + .8(Y-T), planned investment equals 150, and T equals 200 . If the equilibrium level of income is 2,000, then the level of government spending needed to make this true is a. 210. b. 250. c. 50. d. 10. e. none of the above. ANSWER A
In the long run ________. A) the amount of output an economy can produce is determined by real variables like capital, labor and technological advances B) aggregate supply is fixed at the potential level of output C) there is enough time for prices to fully adjust so the classical dichotomy holds D) all of the […]
If people increase their expected rate of interest, the speculative demand for money curve will _____ and money supply will _____. a. shift downward, remain unchanged. b. shift upward; remain unchanged. c. not be affected; shifts upward. d. not be affected; not be affected. ANSWER A
