In the Keynesian model, a $5 billion decrease in investment leads to ________ in short-run equilibrium output.
A. a greater than $5 billion decrease
B. no change.
C. a $5 billion decrease
D. a $5 billion increase
Answer: A
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For consumers, goods A and B are complementary goods. The cost of a resource used in the production of A decreases. As a result
A) the equilibrium price of B will fall and the equilibrium price of A will rise. B) the equilibrium price of B will rise and the equilibrium price of A will fall. C) the equilibrium prices of both A and B will rise. D) the equilibrium prices of both A and B will fall.
Moral hazard:
A. always happens when adverse selection is a problem. B. never happens when adverse selection is a problem. C. can happen when adverse selection is a problem. D. None of these statements is true.
Interest provides an incentive for households to defer current consumption
a. True b. False
Which of the following is an advantage of open market operations over other Federal Reserve policy tools?
a. Use of the other tools must be approved by the President. b. Use of the other tools must be approved by Congress. c. Open market operations are more precise. d. Open market operations do not change interest rates. e. The U.S. Treasury and the Fed work together to undertake open market operations.