Your roommate is having trouble grasping how monetary policy works. Which of the following explanations could you use to correctly describe the mechanism by which the Fed can affect the economy through monetary policy? Increasing the money supply
A) lowers the interest rate, and firms increase investment spending.
B) causes people to spend more because they know prices will rise in the future.
C) raises the interest rate and consumers decrease spending on durable goods.
D) lowers the interest rate, raises the value of the dollar, lowers the prices of exports, and raises net exports.
Answer: A
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"Opportunity cost" is
A) the monetary cost of one's actions. B) the objective cost of one's actions. C) the regret one feels when making a sacrifice. D) the value one places on the item, project, or plan he has chosen to pursue. E) none of the above.
Since the 1980s,
a. monetarism reached its peak. b. the influence of the monetarists and Keynesians both eroded. c. monetarism re-established itself with a stable money/income relationship. d. monetarism declined in influence as Keyesian thought overtook it in influence.
If the output effect is larger than the price effect, an individual firm will __________ production
Fill in the blank(s) with correct word
Efficiency wages create a
a. shortage of labor and so reduce unemployment. b. shortage of labor and so raise unemployment. c. surplus of labor and so reduce unemployment. d. surplus of labor and so raise unemployment.