Assume an economy is in equilibrium at an output level of $1,500 billion. If government spending increases by $200 billion, then at the output level of $1,500 billion, there is
A. an unplanned rise in inventories.
B. an unplanned inventory change of zero.
C. an unplanned fall in inventories.
D. either an unplanned increase or decrease in inventories depending on the value of the MPC.
Answer: C
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Foreign exchange market intervention is most effective when:
a. each country's political leaders agree to cooperate fully with the process. b. leading economists in each country concur that intervention is needed. c. permanent differences between the free market exchange rate and the fixed exchange rate are expected. d. temporary differences between the free market exchange rate and the fixed exchange rate are expected. e. all the countries restrict the international movement of goods and services.
In the foreign exchange market between the Brazilian real and the U.S. dollar, if U.S. interest rates fall relative to Brazilian interest rates, the Brazilian real will appreciate relative to the U.S. dollar.
Answer the following statement true (T) or false (F)
One reason that the aggregate demand curve has a negative slope is because
A) firms supply more when prices rise. B) people buy more foreign goods when the domestic price level rises. C) the amount of money in the economy increases when the price level rises. D) firms supply less when prices rise.
Government expenditures are considered autonomous in the model meaning that changes are the result of:
A) changes in real income. B) changes in inflation. C) changes in unemployment. D) changes in policy decisions.