A decrease in aggregate demand will cause
A. prices to fall and unemployment to increase according to both classical economists and Keynes.
B. aggregate supply to fall according to Keynes, and unemployment to increase according to classical economists.
C. prices to fall according to classical economists, and unemployment to increase according to Keynes.
D. aggregate supply to fall according to classical economists, and prices to fall according to Keynes.
Answer: C
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The circular flow of income involves the idea that
A) the seller of a good receives exactly the same amount as the buyer spends. B) in every economic exchange one party takes advantage of the other party. C) the seller of a good receives more than the buyer spends. D) the seller of a good receives less than the buyer spends.
The velocity of money
A) is, according to the equation of exchange, equal to M/Y. B) indicates the number of times per year a dollar is spent on final goods and services. C) is, according to the equation of exchange, equal to P/M. D) indicates the speed with which the U.S. Treasury can mint new coins.
All price indexes contain certain distortions or biases that reduce their effectiveness as measures of inflation. Describe these distortions and how they affect price indexes
Leakages include
A. Exports. B. Government spending. C. Inventories. D. Business saving.