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If the Fed wishes to increase long-term investment spending, it must:
A) cut the current short-term interest rate.
B) convince the public that the expected future short-term rates would be low.
C) raise the short-term interest rates but lower the expected short-term future rates.
D) A and B are correct.
Suppose that the money supply is $150 billion and nominal GDP is $600 billion. The
velocity of money is:
A) 4.
B) 3.
C) 2.
D) 5.
A tax on labor causes a smaller drop in equilibrium wages when:
A) the labor supply curve is steep than when it is flat.
B) the labor demand curve is steep than when it is flat.
C) the labor supply curve is flat than when it is steep.
D) the labor demand curve is flat than when it is steep.
Refer to Figure 11.2. Suppose that Ca = 40, MPC = 0.8, I = 10. Equilibrium income is
A) 40.
B) 50.
C) 250.
D) 400.
Suppose that potential output is $6 trillion and real GDP is currently $5.5 trillion. In the
long run, we would expect that:
A) the price level will rise.
B) real GDP will fall.
C) wages and input prices will fall.
D) all of the above
Refer to Figure 11.5. An increase in the marginal propensity to import is best illustrated
by diagram
A) A.
B) B.
C) C.
D) D.
A decrease in the personal income tax rate ________ disposable income which
________ consumption.
A) increases; increases
B) increases; decreases
C) decreases; decreases
D) decreases; increases
GDP per capita means GDP
A) in real terms.
B) adjusted for inflation.
C) per person.
D) divided by the capital stock.
The "expansion" of an economy occurs after
A) firms produce more goods.
B) people spend more money.
C) a trough.
D) an inflationary period.
Figure 19.1
Referring to Figure 19.1, U.S. goods will become more expensive in Mexico if the
exchange rate goes from ________ to ________ pesos to the dollar.
A) 12; 11
B) 12; 13
C) 13; 11
D) 14; 10
Table 13.1
According to the information in Table 13.1, M1 is equal to
A) $620 billion.
B) $672 billion.
C) $842 billion.
D) $1,012 billion.
In the ________ increases in the supply of money will ________.
A) short run; raise total demand and output
B) long run; raise total demand and output
C) long run; lead to lower prices
D) short run; decrease total demand and output
