In the IS-LM model, an increase in government spending in the goods market has an impact on the money market because
a. it increases the money supply.
b. it increases income, which increases money demand.
c. it decreases income, which decreases money demand.
d. it increases interest rates, which decreases money demand.
e. none of the above.
B
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Refer to above figure. In the absence of trade, how many Widgets does this country consume?
What will be an ideal response?
When OPEC raises the price of petroleum, American expenditures on oil imports increase, suggesting that
a. the United States' elasticity of demand for imported oil is greater than one. b. the United States' elasticity of demand for imported oil is less than one. c. imported oil and domestically produced oil are complementary goods. d. the short-run elasticity of demand for oil is greater than the long-run elasticity.
Figure 10-8
If the economy were operating at point a in , the real rate of interest would tend to
a.
decrease and move the economy toward point c.
b.
decrease and move the economy toward point b.
c.
increase and move the economy toward point c.
d.
increase and move the economy toward point b.
Wages paid to teachers, police personnel, and postal workers are not transfer payments because they are payments for services and not simply "transfers" of money.
Answer the following statement true (T) or false (F)