Firms have inventories that they can draw down to meet an increase in demand. This will
A. increase the size of the multiplier, because firms will be able to respond more quickly to a change in demand.
B. decrease the size of the multiplier, because output will not immediately respond to changes in demand.
C. have no effect on the multiplier, because the MPC remains unchanged.
D. either increase or decrease the multiplier, depending on the size of the MPC.
Answer: B
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Refer to the figure above. Which of the following is likely to happen if a price control of $40 is imposed?
A) There will be a surplus of 10 units in the market. B) There will be a shortage of 10 units in the market. C) There will be a surplus of 20 units in the market. D) There will be a shortage of 20 units in the market.
What are the five main determinants of consumption spending? Which of these is the most important?
What will be an ideal response?
According to Say's Law, supply creates its own demand
a. True b. False
If the Fed increases the required reserves, financial institutions would be expected to lend out:
A. less than before, increasing the money supply. B. more than before, decreasing the money supply. C. less than before, decreasing the money supply. D. more than before, increasing the money supply.