In an economy where aggregate spending is given by Y = 3,000 + .75Y - 10,000 r, the central bank is currently setting the interest rate at 0.05 (5 percent). If potential output equals 10,800, the central bank must ________ the interest rate to close the ________ gap.
A. lower; recessionary
B. raise; recessionary
C. raise; expansionary
D. lower; expansionary
Answer: A
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If the economy is producing a combination of goods inside its production possibilities frontier, then
a. workers are on vacation b. a significant number of workers have little education c. some resources are being wasted d. technology must improve before output can increase e. the opportunity cost of producing more output is greater than the value of the additional output that could be produced
Politicians and economists who are generally conservative tend to believe that
a. the self-correcting mechanism is slow and unpredictable. b. the short-run Phillips curve is relatively steep. c. the costs of unemployment are high. d. expectations in reaction to policy measures are very slow to change.
Which of the following is associated with peaks in the business cycle?
a. High unemployment b. Recessions c. Low unemployment d. Depression
The main difference between sales finance and consumer finance is:
A. the size of the purchase involved. B. one deals with equipment leasing and the other does not. C. the type of borrower. D. the length of time until the loan has to be repaid.