Keynes believed that an increase in savings would:
A. raise aggregate demand by increasing consumption.
B. raise aggregate demand by reducing investment.
C. reduce aggregate demand by reducing investment.
D. reduce aggregate demand by reducing consumption.
Answer: D
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A firm invests in a new machine that costs $2,000 a year but is expected to produce an increase in total revenue of $2,200 a year. The current real rate of interest is 8%. The firm should
A. undertake the investment, because the expected rate of return of 9% is greater than the real rate of interest. B. not undertake the investment, because the expected rate of return of 7% is less than the real rate of interest. C. undertake the investment, because the expected rate of return of 12% is greater than the real rate of interest. D. undertake the investment, because the expected rate of return of 10% is greater than the real rate of interest.
Becky decides to spend $50 per month on DVD rentals and movie tickets. Her marginal utility schedules from these two goods are shown in the table above. The price of a DVD rental is $2.50, and the price of a movie ticket is $5
Suppose Becky rents 8 DVDs and buys 6 movie tickets per month. She A) cannot increase her total utility because she already gets the maximum possible utility from DVD rentals and movies within her budget. B) can increase her total utility if she rents more DVDs and buys more movie tickets. C) can increase her total utility if she rents more DVDs and buys fewer movie tickets. D) can increase her total utility if she rents fewer DVDs and buys more movie tickets.
Protectionism may reduce imports, and it will also
a. appreciate the dollar, reducing exports. b. appreciate the dollar, increasing exports. c. depreciate the dollar, increasing exports. d. depreciate the dollar, reducing exports.
The fact that investors can always hold cash creates:
A. negative nominal interest rates. B. a problem for monetary policymakers when the short-term interest rates approach zero. C. an opportunity for the U.S. treasury to issue bonds that actually have negative nominal interest rates. D. an upward bound on nominal interest rates.