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Where is the interest rate determined in the classical model?
a. In the goods market
b. In the loanable funds market
c. By the federal government
d. By the Fed
e. Where aggregate expenditure equals GDP.
If a change in investment spending is due to a change in the price level, then the
aggregate demand curve will shift.
If a factory hires 1,000 new workers, the nation's output level is probably
a. increasing and unemployment is likely to increase
b. increasing and unemployment is likely to decrease by 1000 individuals
c. fluctuating
d. stable
e. increasing and unemployment is likely to decrease by less than 1,000 individuals
Figure 4-3 shows the supply and demand for socks. If a price floor of $10 is imposed,
the quantity of socks actually purchased will be
a. 6 pairs
b. 10 pairs
c. 2 pairs
d. 8 pairs
e. 1 pair
If the Fed decreases the money supply, we should expect the interest rate
a. to fall, spending on automobiles and business investment spending to rise, and the
price of bonds to increase
b. to rise, spending on automobiles and business investment spending to fall, and the
price of bonds to decrease
c. to rise, spending on automobiles and business investment spending to fall, and the
price of bonds to increase
d. to fall, spending on automobiles and business investment spending to fall, and the
price of bonds to decrease
e. to rise, spending on automobiles to fall, business investment to rise, and the price of
bonds to decrease
Equilibrium GDP and the interest rate are interdependent.
Refer to Figure 15-10. Suppose that output in the economy is currently below full
employment. If real GDP is $6.8 trillion and a demand shock lowers real GDP to $6.5
trillion, what would we expect to occur in the long run?
a. The aggregate supply curve will shift upward as wages fall.
b. The aggregate supply curve will shift downward as wages fall.
c. The aggregate demand curve will shift rightward as wages fall.
d. The aggregate demand curve will shift leftward as wages fall.
e. No further changes in aggregate supply or aggregate demand without government
intervention.
Which of the following would cause the aggregate demand curve to shift to the right?
a. An increase in the price level
b. A decrease in the price level
c. An increase in government purchases
d. An increase in taxes
e. An increase in the interest rate.
In the classical model, the demand for loanable funds comes from
a. consumption expenditures and the government deficit, if any
b. net taxes and government expenditures
c. government purchases
d. investment spending and the government deficit, if any
e. consumption expenditures, investment spending and government purchases
A critical assumption is one
a. that affects a model in important ways
b. that is understood only by economists
c. that makes a model simpler without affecting any of its important conclusions
d. with negative implications for a process or outcome
e. that is critically unreasonable
If a new computer program was developed that dramatically improved productivity in
most firms, what would happen in the labor market?
a. The real wage would not change but employment would decrease.
b. The real wage would increase and employment would decrease.
c. The real wage would decrease and so would employment.
d. The real wage would decrease and employment would increase.
e. The real wage would increase and so would employment.
In the classical model, the quantity of loanable funds supplied is
a. positively related to the level of income
b. negatively related to the price level
c. positively related to the price level
d. negatively related to the interest rate
e. positively related to the interest rate
A fluctuating rate of inflation
a. will cause a downturn in the housing sector
b. redistributes income from creditors to debtors
c. redistributes income from the employed to the unemployed
d. was the problem that originally led to the creation of the Federal Reserve System
e. interferes with long-run planning
If Mike buys a bond today for $400 that pays him $500 in one year, what is the implied
interest rate?
a. 80 percent.
b. 125 percent.
c. 20 percent.
d. 25 percent.
e. 22 percent.
Which of the following prices is least likely to be included in the Consumer Price
Index?
a. The price of used bicycles
b. The price of a haircut
c. The price of imported South American grapes
d. The price of a steamroller
e. The price of a loaf of bread
The demand for curve for money
a. shows the amount of money people actually hold
b. shows the amount of money people would like to hold, given the constraints they
face
c. shifts if the interest rate changes
d. is independent of the price level
e. changes whenever the Fed changes the money supply.
If buyers' tastes and preferences shift in favor of a good, the result is
a. an increase in quantity demanded
b. an increase in demand
c. an increase in quantity demanded and an increase in supply
d. a decline in supply
e. an increase in supply
During the Great Depression the price level increased.
