Starting at point A, a reduction in government spending would cause
a. the quantity of loanable funds traded to increase to $125 and the interest rate to rise to 7% (point C).
b. the quantity of loanable funds traded to decrease to $75 and the interest rate to fall to 5% (point B).
c. the quantity of loanable funds traded to increase to $125 and the interest rate to fall to 5% (point D).
d. the quantity of loanable funds traded to decrease to $75 and the interest rate to rise to 7% (point E).
Answer: c. the quantity of loanable funds traded to increase to $125 and the interest rate to fall to 5% (point D).
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Use the following diagram to answer the next question.
Based on this diagram, we can say ________.
A. crowding out is limiting the effectiveness of expansionary monetary policy B. investment demand will not respond when interest rates change C. there is a liquidity trap D. monetary policy is likely to be pro-cyclical
Which of the following is a positive economic statement?
A) The temperature is too high today. B) The temperature is 105 degrees today. C) It is too hot to jog today. D) I enjoy summer evenings when it cools off.
Kris, Taylor and Max are the only three residents in a neighborhood. A public good that would benefit all of them has a one-time installation cost of $900. The value of the public good to each resident is shown in the table below. Any tax plan must be approved by simple majority. ResidentReservation PriceIncomeKris$100$1,000Taylor$200$5,000Max$700$6,000 Installing the public good would ________ total economic surplus by ________.
A. decrease; $100 B. increase; $100 C. increase; $1,000 D. decrease; $900
In 1995, the United States threatened to impose 100 percent tariffs on ________ from ________ if it didn't loosen its protectionist policies.
A. luxury cars; Japan B. auto parts; Japan C. brandies; France D. light trucks; Germany