Refer to the graphs, in which the numbers in parentheses near the AD1, AD2, and AD3 labels indicate the level of investment spending associated with each curve, respectively. All numbers are in billions of dollars. The interest rate and the level of investment spending in the economy are at point D on the investment demand curve. To achieve the long-run goal of a noninflationary full-employment output Qf in the economy, the Fed should try to:
A. Decrease aggregate demand by increasing the interest rate from 2 to 4 percent
B. Decrease aggregate demand by increasing the interest rate from 4 to 6 percent
C. Increase aggregate demand by decreasing the interest rate from 4 to 2 percent
D. Increase the level of investment spending from $120 billion to $150 billion
B. Decrease aggregate demand by increasing the interest rate from 4 to 6 percent
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A country producing a combination of 5 units of guns and 6 units of butter would be _________________ (outside/on/inside) the production possibilities curve
What will be an ideal response?
For investors, commercial paper is a close substitute for
A) U.S. Treasury bills. B) U.S. Treasury bonds. C) corporate bonds. D) municipal bonds.
If an agent is risk averse and a principal is risk neutral, if the agent pays the principal a fixed fee
A) all risk is eliminated. B) the risk neutral person bears all the risk while the risk averse person bears none. C) the risk averse person bears all the risk while the risk neutral person bears none. D) the principal and agent share risk equally.
When disposable income is 2000, how much is consumption?
