Based on our understanding of the model presented in Chapter 3, a reduction in investment will cause
A) an increase in the multiplier.
B) a reduction in the multiplier.
C) a reduction in the marginal propensity to save.
D) a reduction in output.
E) both B and D
D
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Oil prices have risen temporarily, due to political uncertainty in the Middle East. An advisor to the Fed suggests, "Higher oil prices reduce aggregate demand. To offset this we must increase the money supply
Then the price level won't need to adjust to restore equilibrium, and we'll prevent a recession." Analyze this statement using the IS—LM model.
Instruments which provide payments to holders of bonds in the event of default are known as ________
A) collateralized bond obligations B) tertiary payment devices C) credit default swaps D) mortgage-backed securities
Federal Reserve regulations apply
a. to all banks in the United States b. only to member banks c. only to private commercial banks d. only to national banks e. only to state banks
When consumers lose confidence in the future of their economy, they begin to consume more, and this causes the aggregate demand curve to shift to the right
a. True b. False Indicate whether the statement is true or false