Which scenario best explains the Keynesian transmission mechanism when the investment demand curve is vertical?
A) The interest rate falls, investment falls even more, the AD curve shifts rightward, but total expenditures do not change.
B) The interest rate falls, investment rises, total expenditures rise, and the AD curve shifts rightward.
C) The interest rate falls, investment falls instead of rising, and the AD curve ends up shifting leftward.
D) The interest rate falls, but investment does not respond; there is no change in total expenditures and no shift in the AD curve.
D
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"The level of employment in an economy determines its real GDP, other things held constant." Do you agree or disagree? Why? What assumptions are necessary for your conclusion based on the classical model?
What will be an ideal response?
The above figure shows two Lorenz curves. Lorenz curve A shows the distribution of income and Lorenz curve B shows the distribution of wealth. Which statement below is CORRECT?
A) The Lorenz curve for wealth shows that wealth is distributed less equally because wealth does not include human capital. B) The Lorenz curve for income shows that income is distributed less equally because income does not include income from stocks and bonds. C) The Lorenz curves show wealth is greater than income. D) The Lorenz curves show income is greater than wealth.
Keynesians believe the economy can be managed using monetary and fiscal policy.
Answer the following statement true (T) or false (F)
Which of the following events shifts the short-run aggregate supply curve to the right?
A. An increase in government spending on military equipment B. A drop in oil prices C. An increase in price expectations D. None of the above is correct.