Suppose the economy has an inverted yield curve. According to the expectations hypothesis, which of the following interpretations could be used to explain this?
A. The term spread is positive.
B. Investors prefer bonds with less interest-rate risk.
C. Investors prefer bonds with less default risk.
D. Interest rates are expected to fall in the future
Answer: D
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The aggregate money demand depends on
A) the interest rate. B) the price level. C) real national income. D) the interest rate, price level, and real national income. E) the price level and the liquidity of the asset.
Which of the following is an example of an automatic stabilizer?
a. Decrease in tax rates by Congress in times of unemployment b. Decrease in tax rates by Congress in times of inflation c. Increase in government defense spending during war d. Increase in unemployment compensation during recession e. Decrease in welfare programs during inflation
An increase in the expected inflation rate will: a. shift the short-run Phillips curve upward and to the right
b. shift the short-run Phillips curve downward and to the left. c. not shift the short-run Phillips curve unless the unemployment rate changes. d. cause the unemployment rate associated with each inflation rate to decrease. e. tend to increase production unless the actual inflation rate also increases.
Economic growth is likely to entail:
A. a reduction in investment. B. a decrease in the capital stock. C. higher saving. D. lower saving.