Critics of supply-side economics argue that tax cuts favored by supply-siders will have the greatest effect on
A. aggregate supply.
B. tax receipts.
C. aggregate demand.
D. the money supply.
Answer: C
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Starting from long-run equilibrium, a large decrease in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; lower; potential B. expansionary; higher; potential C. recessionary; lower; potential D. recessionary; lower; lower
Use the following market-for-money diagrams to answer the next question.
If the Federal Reserve increased the stock of money, the
A. S curve would shift leftward and the equilibrium interest rate would rise. B. D3 curve would shift leftward and the equilibrium interest rate would rise. C. S curve would shift rightward and the equilibrium interest rate would fall. D. D3 would shift leftward and the equilibrium interest rate would fall.
The nominal interest rate in the U.S. is 5% and the nominal interest rate in Canada is 3%. The spot value of the U.S. dollar is 1 ($/Canadian dollar) and the forward rate is 1.2 ($/Canadian dollar). Calculate the forward discount or premium for the dollar. Does the interest parity condition hold? If not explain what is likely to occur in foreign exchange markets. Assume that interest rates cannot
change. What will be an ideal response?
When ticket scalping is legal, economists insist that the market created ensures that
A. the promoter makes the most money possible. B. the performers make the most money possible. C. the people who care the most in their hearts will see the event. D. the people who are willing to give up the most money will see the event.