A primary emphasis of the Keynesian school is the economy has a tendency to:
A. always create a full-employment level of output.
B. always create inflationary pressure at all levels of output.
C. eliminate unemployment by lowering wage rates to create an equilibrium in the labor market.
D. be in equilibrium at less than full employment.
Answer: D
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Using aggregate demand and aggregate supply, explain what happens in the short run if the Federal Reserve raises interest rates in the economy. Be sure to detail what happens to aggregate demand, the price level, the level of GDP, and unemployment
Assume that the economy is at full employment before the interest rate increase.
When there's uncertainty as to the length of a game
A) cooperation still does not occur, because cooperation unravels at the beginning of the game. B) cooperation can potentially occur if trigger strategies are adopted. C) firms will cooperate because they treat the game as one that is infinitely repeated. D) firms will randomly pick among the Nash equilibria.
If a natural disaster were to cause a negative long-run supply shock to the economy, once the economy adjusts, the new equilibrium will be at a:
A. higher price level and lower level of output. B. lower price level and lower level of output. C. higher price level and higher level of output. D. lower price level and higher level of output.
The Monetarist transmission mechanism through which monetary policy affects the price level, real GDP, and employment depends on the:
a. indirect impact of changes on the interest rate. b. indirect impact of changes on profit expectations. c. direct impact of changes in fiscal policy on aggregate demand. d. direct impact of changes in the money supply on aggregate demand.