If Social Security is over-indexed, real payments
a. are lower than they would be if they were correctly indexed.
b. are higher than they would be if they were correctly indexed.
c. are constant.
d. are decreasing.
e. are under-indexed.
B
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Refer to the above figure. The government has just engaged in expansionary fiscal policy shifting the aggregate demand curve from AD1 to AD2. Interest rates have started to rise. Which of the following statements is TRUE in the short run?
A) Real GDP will be $14 trillion since the effect of government spending is not influenced by interest rates. B) Real GDP will end up somewhere between $11 and $14 trillion as businesses and consumers reduce their spending in response to the increase in interest rates. C) Real GDP will go beyond $14 trillion as businesses and consumers react to the increase in interest rates. D) Real GDP will fall back to $11 trillion since the effect that increased government spending has on real GDP is short lived.
If velocity is equal to 4, this means that
A) the rate of growth of the money supply is 4. B) an increase in the money supply will lead to an increase in aggregate supply of 4. C) each dollar of the money supply is spent on the average 4 times per year. D) for every 4 dollars of the money supply, nominal GDP will increase by 4.
What was not one of the problems of the Articles of Confederation?
a. It did not allow the federal government to tax. b. It did not give the federal government sufficient power to define international relationships. c. It could not keep the states together as a political union. d. It did not give the federal government the sole right to mint coins.
Economists assume that, in general, when individuals are faced with two choices that have the same expected value, they will prefer:
A. the one with higher risk. B. the one with lower risk. C. the one with the higher opportunity cost. D. the one with the lower future value.