The anticipated effect of contractionary monetary policy is
A. increase in aggregate demand.
B. fall in interest rates.
C. increased capital outflow.
D. appreciation of the currency.
Answer: D
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Suppose that the equilibrium nominal interest rate is 5 percent and the equilibrium quantity of money is $1 trillion. At any interest rate below 5 percent,
A) the supply of money will decrease. B) there will be a surplus of money and bond prices will increase. C) the interest rate will fall and bond prices will fall. D) there will be a surplus of money and bond prices will fall. E) the interest rate will rise and bond prices will fall.
If the government allows businesses to accelerate (increase) depreciation, then
A) the user cost of capital declines and V* increases. B) the user cost of capital declines and V* decreases. C) the user cost of capital increases and V* decreases. D) the user cost of capital increases and V* increases.
Giving poor people food instead of cash for food
A. is an in-kind transfer. B. will benefit some more than others, depending on their utility function. C. is politically popular. D. all of these answer options are correct.
If a business firm is not operating at the point where MR = MC, then:
a. it should shut down. b. it will incur losses. c. it cannot be earning a profit. d. its profit is zero. e. it is not earning the maximum potential profit.