One way inflation reduces aggregate demand is by:
A. increasing wealth.
B. increasing nominal GDP.
C. increasing velocity.
D. reducing real balances.
Answer: D
You might also like to view...
The substitution effect of an increase in the price of peaches is
A) the change in the quantity of peaches demanded that results from the effect of the change in the price of peaches on the consumer's purchasing power. B) the change in the demand for nectarines (a substitute good) that results when peaches become more expensive relative to nectarines, holding constant the effect of the price change on consumer purchasing power. C) the change in the demand for peaches that results when the price of peaches increases. D) the change in the quantity demanded that results from a change in the price of peaches, making peaches more expensive relative to other goods, holding constant the effect of the price change on consumer purchasing power.
Which of the following is a component part of investment spending?
A) the purchase of a new microwave by a fast food restaurant B) the purchase of 500 shares of corporate stock C) the sale of 500 shares of corporate stock D) all of the above
A higher interest rate will:
a. shift the consumption function upward b. shift the consumption function downward. c. make the consumption function steeper. d. make the consumption function flatter. e. cause an upward movement along the consumption function.
If the general level of prices is higher than business decision makers anticipated when they entered into long-term contracts for raw materials and other resources, which of the following is most likely to occur?
a. a recession b. output less than the economy's long-run potential c. a sharp reduction in imports d. an unemployment rate that is less than the economy's natural rate of unemployment