Describe how Say's law can hold in a money economy, according to the classical economists
In order for Say's law to hold in a money economy, any money that is saved must be spent through investment. Interest rate flexibility is the key to the classical economists' argument. If households save more and spend less, the increased dollars saved push down market interest rates. Lower interest rates will stimulate investment and make up for the lack of spending by households so that no overproduction will occur.
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An assumption used in the quantity theory of money is that
A) velocity is constant. B) the money supply is constant. C) nominal Gross Domestic Product (GDP) is constant. D) the price level is constant.
The GDP deflator measures
A) the quality of the goods and services in GDP. B) the quantity level. C) nominal GDP. D) real GDP. E) the price level.
Equilibrium expenditure is the level of expenditure at which
A) aggregate planned expenditure minus planned changes in inventories equals real GDP. B) aggregate planned expenditure plus planned changes in inventories equals real GDP. C) firms' inventories are zero. D) firms produce more output than they sell. E) firms' inventories are at the desired level.
When a perfectly competitive firm is in long-run equilibrium:
A) its total revenues equal the sum of its total explicit and implicit costs costs. B) the firm is operating at the minimum of its LRAC curve. C) the firm is earning zero economic profit. D) All of the above.