As interest rates drop, households tend to borrow more and businesses tend to borrow less
Indicate whether the statement is true or false
False
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The SRAS curve is upward sloping, there is a liquidity trap, and investment spending is sensitive to changes in the interest rate. According to the monetarist transmission mechanism, if the money supply increases the AD curve __________ and the price level __________
A) does not change; does not change B) shifts to the left; falls C) shifts to the right; rises D) does not change; rises E) none of the above
In the crowding-out effect, ______.
a. government purchases increase interest rates, which crowd out investment and consumer spending and shift the aggregate demand curve to the left b. higher interest rates increase investment and consumer spending, which crowd out government purchases and shift the aggregate demand curve to the left c. government purchases lower interest rates, which crowd out unemployment and inflation and shifts the aggregate demand curve to the right d. low interest rates lead to increased government spending, which is crowded out by investment and consumption spending and shifts the aggregate demand curve to the right
If the marginal product of an input is falling, then
A) average fixed cost is constant. B) marginal cost is falling. C) average total cost is constant. D) marginal cost is rising.
A short-run decrease in the price of a firm's output will typically
A. lead to a movement along the firm's demand for labor curve. B. not impact the hiring of labor. C. make the demand for labor more inelastic. D. lead to lower employment of labor in the competitive firm.