Classical economists believe that when the aggregate supply curve is horizontal, monetary policy and fiscal policy will have no effect on real output.
Answer the following statement true (T) or false (F)
False
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The investment function intersects the saving schedule at an interest rate of 8 percent and a level of investment of $1.2 trillion a year. If the consumption curve intersects the 45-degree reference line at $3 trillion, then
A) the C + I curve will intersect the 45-degree reference line at $1.2 trillion. B) the C + I curve will intersect the 45-degree line at $1.8 trillion. C) the equilibrium level of real GDP is $1.8 trillion. D) the equilibrium level of real GDP is $4.2 trillion.
In the calculation of the CPI, tea is given greater weight than beer if
a. the price of tea is higher than the price of beer. b. it costs more to produce tea than it costs to produce beer. c. tea is more readily available than beer to the typical consumer. d. consumers buy more tea than beer.
The value of a firm is
A. the price for which the firm can be sold minus the present value of the expected future profits. B. larger the higher is the risk premium used to compute the firm's value. C. smaller the higher is the risk premium used to compute the firm's value. D. both b and c
The money supply (M1) includes currency held by the public plus
A. Balances in most savings accounts and money market mutual funds. B. Transactions accounts plus money market mutual funds. C. Currency held by the Fed and Treasury and transactions accounts. D. Transactions accounts plus travelers checks.