Within the simple Keynesian Cross model, equilibrium takes place:
a. at full employment
b. when aggregate spending equals real disposable income.
c. when the money interest rate and real interest rate are equal.
d. when actual and expected rates of inflation are equal.
b
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In the rational expectations model
a. markets are perfectly competitive and in equilibrium. b. markets may not clear even if wages and prices are otherwise perfectly flexible. c. markets may temporarily be in disequilibrium. d. only anticipated changes in aggregate demand affect output.
A bank that has $10,000 in excess reserves can extend new loans up to a maximum of
a. $1,000. b. $9,000. c. $10,000. d. $100,000.
Suppose that the organic-produce industry is composed of a large number of small firms. In recent years, these firms have suffered economic losses, and many sellers have left the industry. Economic theory suggests that these conditions will
a. shift the demand curve outward so that price will rise to the level of production cost. b. cause the remaining firms to collude so that they can produce more efficiently. c. cause the market supply to decline and the price of organic produce to rise. d. cause firms in the organic-produce industry to suffer long-run economic losses.
The justification for occupational licensing laws is that they protect the public from incompetent practitioners (for example, lawyers and medical doctors), but the laws also result in
A) higher prices and restrictions on the number of people who can enter the professions affected by the laws. B) economies of scale. C) ownership of a key input. D) an increase in the amount of output required to achieve minimum efficient scale.