In the Keynesian model, if interest rates rise above what people consider normal, households will respond by
A) increasing the saving rate.
B) reducing the saving rate.
C) holding more money.
D) holding more bonds.
D
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According to proponents of the interest-rate-based monetary policy transmission mechanism, any increase in the money supply
A) causes velocity to increase, and so in the short run nominal Gross Domestic Product (GDP) must increase. B) will increase Gross Domestic Product (GDP) only if interest rates fall and investment is sensitive to decreasing interest rates. C) is effective in increasing Gross Domestic Product (GDP) only if it causes an outward shift of the aggregate supply curve. D) will move the economy from the "liquidity trap" during times of recession if interest rates fall enough to stimulate private investment.
The government uses the buying power of wages rather than face value or nominal value in reporting changes in "real wages" in the economy
Indicate whether the statement is true or false
George was assigned to read a chapter in economics tonight, but he has a math exam tomorrow. He chooses to study for the math exam and postpone his economics studies until after the exam. What is the opportunity cost of George's decision?
A) The lower math grade he would have received had he not studied for the math exam B) The economics knowledge he sacrificed by not reading the assigned chapter C) Both A and B above D) Without information regarding the price of the textbook and the value to George of the math exam, George's opportunity cost cannot be determined.
What are two important properties of economic models? Models tend to be simplified descriptions of a real-world phenomenon. Does this mean that they are unrealistic?
What will be an ideal response?