In Figure 11.1, assume that QF is full-employment output and the level of aggregate spending is represented by AD1. If AD1 increases to AD2, which of the following statements is correct?
A. Excess AD and inflation will be the result.
B. Full employment will not be reached because some of the additional spending results in higher prices rather than higher output.
C. A lower price level will result.
D. Full employment will be reached.
Answer: B
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Which of the following characterizes a perfectly competitive market?
A) The market demand curve is vertical. B) The demand for each individual firm's product is perfectly elastic. C) Each firm sets a different price. D) Each firm produces a product slightly different from that of its competitors.
The interest rate that banks charge other banks for overnight loans is the
A) discount rate. B) Treasury bill rate. C) prime rate. D) federal funds rate.
The opportunity cost of money is
A) zero. B) the inflation rate. C) the real interest rate. D) the nominal interest rate.
Liberals believe
a. that the government should choose just policies as evaluated by an impartial observer behind a "veil of ignorance.". b. in the assumption of diminishing marginal utility. c. that everyone in society should have equal utility. d. that the government should not redistribute income.