Using Figure 1 above, if the aggregate demand curve shifts from AD3 to AD2 the result in the long run would be:
A. P1 and Y2.
B. P2 and Y1.
C. P3 and Y1.
D. P3 and Y2.
Answer: D
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Suppose a bank wants a 5% real return on its loans, and contemplates a 1% annual inflation rate. The bank should therefore charge a nominal interest rate of
A) 1%. B) 4%. C) 5%. D) 6%.
Gross Domestic Product is the market value of
a. all exchanges made during the course of a year b. all final goods produced during the course of a year c. all monetary transactions during the course of a year d. all the goods produced during the course of a year over and above what is required to maintain the population and the stock of capital e. all final goods sold during the course of a year
Starting from long-run equilibrium, a war that raises government purchases results in ________ output in the short run and ________ output in the long run.
A. lower; potential B. higher; potential C. higher; higher D. lower; higher
If the government decreases its purchases of goods and services by $12,000 and the MPS is 0.5, GDP and income will eventually decrease by:
A. $2,400. B. $6,000. C. $24,000. D. $60,000.