Use the following graph of the total demand for money to answer the next question.
Assume we begin at point a. An increase in the interest rate will can be shown as a move to ________.
A. point b
B. point c
C. point d
D. point e
Answer: A
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If a monopolistically competitive firm breaks even, the firm
A) is earning zero accounting and zero economic profit. B) should expand production. C) is earning an accounting profit and will have to pay taxes on that profit. D) should advertise its product to stimulate demand.
A U.S. bakery buys wheat from Canada and pays for it with US dollars. This transaction
a. increases Canadian net exports, and increases U.S. net capital outflow. b. increases Canadian net exports, and decreases U.S. net capital outflow. c. decreases Canadian net exports, and increases U.S. net capital outflow. d. decreases Canadian net exports, and decreases U.S. net capital outflow.
In a short-run Keynesian model where the marginal propensity to consume is 0.5, to offset a recessionary gap resulting from a $1 billion decrease in autonomous consumption, government purchases must be:
A. increased by $1 billion. B. increased by $0.5 billion. C. decreased by $1 billion. D. increased by $2 billion.
What happens when the Federal Reserve purchases U.S. government bonds?
A) Interest rates rise because bonds become scarcer. B) Commercial bank reserves increase. C) The national debt declines in size. D) The growth rate of the money stock falls. E) All of the above occur.