Firms in a small economy anticipated that inventories would grow over the past year by $500,000. Over that year, inventories actually grew by only $400,000. This implies that
A) there was a planned increase in inventories that year.
B) aggregate expenditure that year was greater than GDP that year.
C) aggregate expenditure that year was equal to GDP that year.
D) there was an unplanned increase in inventories that year.
B
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The CPI is also referred to as
A) the inflation-consumption index. B) the producer price index. C) the cost-of-living index. D) the GDP deflator.
Suppose that there is a positive aggregate demand shock and the central bank commits to an inflation rate target. If the commitment is credible, then
A) the public's expected inflation will remain unchanged. B) the short-run aggregate supply curve will not shift. C) over time inflation will fall back down to the inflation target. D) all of the above. E) both A and B.
The Keynesian cause-and-effect sequence predicts that a decrease in the money supply will cause interest rates to:
a. fall, boosting investment and shifting the AD curve rightward, leading to an increase in real GDP. b. fall, boosting investment and shifting the AD curve rightward, leading to a decrease in real GDP. c. rise, cutting investment and shifting the AD curve rightward, leading to an increase in real GDP. d. rise, boosting investment and shifting the AD curve rightward, leading to an increase in real GDP. e. rise, cutting investment and shifting the AD curve leftward, leading to a decrease in real GDP.
Insurance companies try to mitigate the problem of adverse selection by:
A. charging a higher premium to groups with similar ages or behaviors that correlate with risky behavior. B. asking potential customers a seemingly endless list of questions to gain as much information as they can about the person's risk characteristics. C. charge a higher price to all individuals to cover the lack of information. D. All of these statements are true.