The economy was initially in equilibrium at point 3 and interest rates increased by 4 percentage points because of government deficit financing. The public spending, however, improves business confidence and activity that exactly offsets the potential crowding-out effect. This situation would result in a new equilibrium at point:
Refer to the above graph.
A. 2
B. 3
C. 4
D. 5
D. 5
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In the DMP model, an increase in productivity does not
A) reduce the unemployment rate. B) increase the vacancy rate. C) increase labor market tightness. D) increase the size of the labor force.
For markets operating at quantities lower than the equilibrium quantity produced in an equivalent perfectly competitive market:
A. the outcome is efficient. B. total surplus is increased. C. consumer surplus is always increased. D. total surplus for society is reduced.
The price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price
a. True b. False Indicate whether the statement is true or false
The fact that there is a market for federal funds enables banks to:
A. hold a lower level of excess reserves than they would otherwise hold. B. hold less in required reserves. C. borrow more from the Fed. D. make fewer loans than they would otherwise.