Suppose investors become more optimistic that the economy will be doing well over the next decade. How will the market for loanable funds as depicted in the accompanying graph be affected?
A. Supply will shift to the left from S2 to S1.
B. Demand will shift to the right from D1 to D2.
C. Demand will shift to the left from D2 to D1.
D. Supply will shift to the right from S1 to S2.
Answer: B
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According to New Keynesian theory, fluctuations in the target interest rate are not a good explanation of the business cycle because the model predicts that
A) consumption is constant. B) labor is countercyclical. C) average labor productivity is countercyclical. D) output is countercyclical.
Which of the following would be excluded from the gross domestic product (GDP)?
a. The mayor of a city hiring more workers to improve the sanitation of the city b. The sale of mobiles decreasing significantly c. The government reducing welfare benefits d. A homemaker spending $20 taking the family out to lunch instead of cooking food , e. A consumer having his pickup truck tuned up at the local garage
The Fed sometimes works to partly offset or even neutralize the effects of fiscal policy with monetary policy
a. True b. False Indicate whether the statement is true or false
In a market where a positive externality is present, the effect of a government subsidy would be to ensure:
A. an efficient outcome. B. that those who enjoy the benefit receive the surplus. C. a more fair distribution of surplus. D. All of these statements are true.