Refer to the above figure. Unexpected expansionary monetary policy has caused the aggregate demand curve to shift to AD2. In the short run
A) the unemployment rate can increase or decrease depending upon how much the LRAS will shift.
B) the unemployment rate will be smaller than the rate before the expansionary monetary policy.
C) the unemployment rate will be larger than the rate before the expansionary monetary policy.
D) the unemployment rate will be the same rate as before the expansionary monetary policy.
B
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In the Keynesian model, if interest rates rise above what people consider normal, households will respond by
A) increasing the saving rate. B) reducing the saving rate. C) holding more money. D) holding more bonds.
Part of the effect of higher interest rates on residential construction is through
A) inflationary expectations. B) credit rationing. C) the expected value of the homes to the buyers. D) the income effect.
If a market is NOT perfectly competitive, then government intervention
A) is always justifiable. B) will usually decrease economic well-being. C) guarantees that societal well-being will be maximized. D) may increase economic well-being.
Supply will become more elastic when
A. there are good substitutes for the goods. B. a time period lengthens. C. the good is important to consumers. D. the time period shortens.