A rightward shift of long-run aggregate supply without any change in aggregate demand A) results in a lower price level. B) increases the price level along with an increase in real GDP. C) will leave real GDP unchanged. D) increases the price level without any change in real GDP. ANSWER A
If the real interest rate is lower than the equilibrium real interest rate: A) the quantity of credit demanded equals the quantity of credit supplied. B) the quantity of credit demanded falls short of the quantity of credit supplied. C) the quantity of credit supplied falls short of the quantity of credit demanded. D) interest […]
The relationship that tells us how much a person intends to spend at various levels of income is A) the expenditure function. B) the consumption function. C) the buying function. D) the spending function. ANSWER B
The asset demand for money is related to the function of money called A) medium of exchange. B) standard of deferred payment. C) store of value. D) unit of account. ANSWER C
Which of the following holds true in a circular flow diagram? A) Income flow are represented by drawing an arrow from the household sector to firms. B) Factor flows are represented by drawing an arrow from the firm sector to the household sector. C) Production flows are represented by drawing an arrow from the firm […]
________ occurs when the Fed creates a large amount of reserves to buy long-term bonds from banks. A) Budgetary surplus B) Monetary neutrality C) Money illusion D) Quantitative easing ANSWER D
Institutions and laws, such as patent protection, that foster innovations lead to economic growth because they A) give businesses loans to buy new machinery. B) give confidence to consumers that the products they buy are safe. C) allow the government control of the innovations. D) give confidence to inventors that they will profit from their […]
Which of the following is NOT a reason why real GDP can be expanded beyond a level consistent with its long-run growth path in modern Keynesian analysis? A) Higher prices induce firms to hire more workers. B) The existing capital stock can be used more intensively. C) Prices and wages are flexible, allowing for needed […]
Structural unemployment is likely to be affected by A) the reservation wage curves of people. B) minimum wage laws and other “rigidities” in the economy. C) recessions and expansions. D) the amount of the money supply. ANSWER B
Holding money as a store of value instead of other assets is A) the capital demand for money. B) the asset demand for money. C) the precautionary demand for money. D) the transactions demand for money. ANSWER B