Suppose the economy is in long-run equilibrium. If the federal government cuts government spending, which of the following is likely to result?
A) an increase in real GDP and an increase in the price level
B) an increase in unemployment and an increase in the price level
C) a decrease in unemployment and a decrease in the price level
D) a decrease in the price level and an increase in unemployment
Ans: D) a decrease in the price level and an increase in unemployment
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In a perfectly competitive industry, influence over price is exerted by
a. individual sellers. b. individual buyers. c. the largest firms. d. the forces of supply and demand.
All else equal, which of the following would tend to cause real GDP per person to rise?
a. a change from inward-oriented policies to outward-oriented policies b. an increase in investment in human capital c. strengthening of property rights. d. All of the above are correct.
The net worth of a bank is defined as the difference between
A. income and expenses. B. assets and liabilities. C. loans and deposits. D. loans and reserves.
If the economy is represented in the graph shown and is currently at point E2, which action is the Fed most likely to undertake?
A. Contractionary monetary policy, because it will shift AD to the left. B. Expansionary monetary policy, because it will shift AD to the right. C. Expansionary monetary policy, because it will shift AD to the left. D. Contractionary monetary policy, because it will shift AS to the right.