Which of the following statements describes the way our home equilibrium reflects the concepts of competitive markets?
I. The opportunity cost of each good is the inverse of the ratio of labor productivity.
II. Prices of each good reflect opportunity cost.
III. Wages are equal and reflect the value of the marginal product of labor (MPL × P) for each good.
a. I
b. II
c. III
d. I, II, and III
Ans: d. I, II, and III
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When the Fed unexpectedly increases the money supply, it will cause an increase in aggregate demand because
a. lower interest rates will stimulate business investment and consumer purchases. b. real interest rates will fall, causing the dollar to depreciate and net exports to rise. c. lower interest rates will cause the value of assets (for example, stocks) to rise. d. all of the above are correct.
If the number of employed people decreases and the average hours worked per week increases, then
An increase in foreign demand for U.S. exports will ____ demand for the dollar, causing the dollar to ______.
Fill in the blank(s) with the appropriate word(s).
Keynes argued that the transactions component of the demand for money was primarily determined by the level of people's ________, which he believed were proportional to ________
A) transactions; income B) transactions; age C) incomes; wealth D) incomes; age