Suppose total planned expenditures equal $20 trillion when the value of the price level is 100. If the price level drops to 90, total planned real expenditures will equal A) more than $20 trillion. B) $20 billion. C) less than $20 trillion. D) None of the above: Cannot be determined without additional information. ANSWER […]
Identify the correct statement. A) Countercyclical monetary policy stimulates the economy during a recession by shifting the labor demand curve to the left. B) Countercyclical fiscal policy stimulates the economy during a recession by shifting the labor demand curve to the left. C) Countercyclical monetary policy slows down the growth rate of an economy during […]
If the labor demand curve shifts to the right due to a government policy during a recession, and if wages are flexible, ________. A) real wages will increase B) real wages will decrease C) prices will fall D) unemployment will increase ANSWER A
Factors that cause a decrease in the demand for credit at a given real interest rate cause: A) the credit demand curve to shift to the right. B) an upward movement along the credit demand curve. C) the credit demand curve to shift to the left. D) a downward movement along the credit demand curve. […]
The average propensity to consume is A) real consumption expenditures divided by real saving. B) real saving divided by real consumption expenditures. C) real consumption expenditures divided by real disposable income. D) real disposable income divided by real consumption expenditures. ANSWER C
What is a primary determinant of the asset demand for money? I. the interest rate II. the opportunity cost of holding money III. the supply of money A) I only B) III only C) both I and II D) both II and III ANSWER C
The Laffer curve A) initially slopes upward as increasing tax rates lead to increasing tax revenue but eventually will slope downward as increasing tax rates lead to decreasing tax revenue. B) slopes upward throughout its range since increasing tax rates will always lead to increases in tax revenue. C) is horizontal because tax revenue is […]
Which of the following is the most liquid asset? A) currency B) shares of stock C) short-term treasury bonds D) small denomination time deposits ANSWER A
To find an economy’s long-run equilibrium price level, locate the point where ________ and ________ cross and look to the left. A) long-run aggregate supply; aggregate demand B) aggregate demand; short-run aggregate supply C) aggregate demand; price level D) demand; supply ANSWER A
Assume that the supply curve for a commodity shifts to the right and the demand curve shifts to the left, and the shift in demand is greater than the shift in supply. Then, in comparison to the initial equilibrium, the new equilibrium will be characterized by: A) a lower price and a higher quantity. B) […]
