Whenever fiscal policy actions, such as income tax cuts, are utilized to expand the economy, the Keynesians prefer
a. a contractionary monetary policy.
b. monetary policy to stay the same because of the liquidity trap.
c. accompanying decreases in the money supply that will cause the interest rate to rise and, thus, prevent the crowding out of investment.
d. accompanying increases in the money supply in order to prevent the interest rate from rising and, thus, prevent the crowding out of investment.
e. both b and/or d
C
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When real GDP exceeds potential GDP, then the economy has
A) an inflationary gap. B) a below-full-employment equilibrium. C) a recessionary gap. D) None of the above answers are correct.
Cost-push inflation can be shown on an aggregate supply aggregate demand diagram as
A) a rightward shift of the aggregate supply curve with no change in aggregate demand. B) a rightward shift in the aggregate demand curve with no change in aggregate supply. C) a leftward shift in the aggregate demand curve with no change in aggregate supply. D) a leftward shift in the aggregate supply curve with no change in aggregate demand.
Categories of unemployment include frictional unemployment, structural unemployment, cyclical unemployment, discouraged workers, and the underemployed
Indicate whether the statement is true or false
The quantity theory of money states that in the long run
A) the price level will not consistently rise, it will fluctuate. B) an increase in the quantity of money results in an equal percentage increase in the price level. C) a rise in the price level rises causes the quantity of money to increase. D) an increase in the quantity of money increases real GDP by a smaller percentage.