The Keynesian cause-and-effect sequence predicts that a decrease in the money supply will cause interest rates to:
A. fall, boosting investment and shifting the AD curve rightward, leading to an increase in real GDP.
B. fall, boosting investment and shifting the AD curve rightward, leading to a decrease in real GDP.
C. rise, cutting investment and shifting the AD curve leftward, leading to a decrease in real GDP.
D. rise, boosting investment and shifting the AD curve rightward, leading to an increase in real GDP.
Answer: C
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What will be an ideal response?
Explain the condition where society would be better off when more of a good is produced
What will be an ideal response?
According to classical economists, the increase in unemployment in recessions is caused by
A) slack aggregate demand. B) the failure of wages to adjust to restore equilibrium in the labor market. C) the power of labor unions, which prevent firms from cutting wages. D) a mismatch of workers and jobs.
Which of the following will change the position of the IS curve?
A) An increase planned investment spending B) An increase in interest rates C) An increase in money demand D) An increase in the money supply