Using Figure 1 above, if the aggregate demand curve shifts from AD2 to AD3 the result in the long run would be:
A. P2 and Y2.
B. P1 and Y2.
C. P4 and Y2.
D. P1 and Y1.
Answer: B
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One effect of inflation is that it is a tax that redistributes goods and services from
A) investors to savers. B) households and businesses to the government. C) businesses to households. D) government to households. E) government to businesses.
The default-risk premium:
A. should vary directly with the bond's yield and the bond's price. B. should be lower for a highly speculative bond than for an investment-grade bond. C. should vary directly with the bond's yield and inversely with its price. D. is less than 0 (zero) for a U.S. Treasury bond.
Assume Congress enacts a $500 billion increase in spending and a $500 billion tax increase to finance the additional government spending. The result of this balanced-budget approach is a:
A. $500 billion decrease in aggregate demand. B. $500 billion increase in aggregate demand. C. $1,000 billion increase in aggregate demand. D. $1,000 billion decrease in aggregate demand.
In developing countries, the highest returns are from investing in:
A. transportation systems. B. sanitation systems. C. education. D. defense.