Milton Friedman called the response of lower interest rates resulting from an increase in the money supply the ________ effect
A) liquidity
B) price level
C) expected-inflation
D) income
A
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Explain the concept of zero lower bound
What will be an ideal response?
In a market economy, income is primarily determined by
a. the productivity of household resources b. the level of transfer payments c. government monetary and fiscal policy d. the geographic distribution of resources e. the amount of financial assets owned by households
Given full-employment output = $2,800, equilibrium real GDP = $2,500, and MPS = 0.25, which of the following changes would most likely bring the economy to a full-employment level of real GDP?
a. $300 decrease in taxes. b. $75 increase in government spending. c. $75 decrease in taxes. d. $300 increase in government spending. e. $75 decrease in government spending.
In the most basic model presented in the text, when aggregate expenditures cross the 45-degree line,
a. saving equals intended investment b. saving is greater than intended investment c. saving is less than intended investment d. saving equals consumption e. saving equals inventories