Explain and show graphically how an increase in government spending affects the equilibrium interest rate in the market for loanable funds
What will be an ideal response?
When government spending increases, government saving (T - G - TR) falls. This decrease in government saving shifts the supply curve for loanable funds to the left, increasing the equilibrium interest rate as shown below.
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An upward shift in the Fed's policy reaction function is a ________ of monetary policy, and the aggregate demand curve ________.
A. tightening; shifts left B. easing; shifts left C. tightening; shifts right D. easing; shifts right
Opportunity cost is the
a. cost incurred when one fails to take advantage of an opportunity. b. cost incurred in order to increase the availability of attractive opportunities. c. cost of the best option forgone as a result of choosing an alternative. d. drudgery of the undesirable aspects of an option.
Studies of wages by labor economists indicate that measurable variables such as age, job characteristics, years of education, and years of experience account for
a. virtually none of the variation in wages in our economy. b. some, but less than 50 percent of the variation in wages in our economy. c. about 75 percent of the variation in wages in our economy. d. almost all of the variation in wages in our economy.
What is the output effect?
What will be an ideal response?