In the interest-rate-based transmission mechanism, a decrease in the money supply will
A. shift the aggregate supply function inward and increase real Gross Domestic Product (GDP).
B. reduce investment, shift the aggregate demand function inward, and lower real Gross Domestic Product (GDP).
C. reduce the rate of interest and the level of investment.
D. increase the price level.
Answer: B
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The social interest theory of regulation is defined as the
A) use of regulations to maximize firms' profits. B) use of regulations to assure an efficient use of resources. C) removal of regulations on business activities. D) implementation and removal of regulations on the cable TV industry. E) use of rate of return regulation.
Suppose the dollar is subject to a floating exchange rate system and that R is the number of dollars per unit of foreign exchange. If R increases, then the dollar
A) depreciates. B) appreciates. C) is devalued. D) is revalued. E) Both A and C.
Explain why the equilibrium price is called the market clearing price
What will be an ideal response?
Answer the following statements true (T) or false (F)
1) A nation's export supply curve is downsloping and its import demand curve is upsloping. 2) The equilibrium world price of a product equates the quantities of exports supplied and imports demanded. 3) Economists prefer free trade to tariffs, and prefer tariffs to import quotas. 4) A side benefit of international trade is that it links national interests and increases the opportunity costs of war.