If there is no Ricardo-Barro effect, a government budget surplus ________ the supply of loanable funds and ________ equilibrium investment
A) decreases; increases
B) increases; increases
C) increases; decreases
D) does not change; does not change
E) decreases; decreases
B
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If a person’s income rises and they do not increase their consumption, we can conclude that
a. the good is not inferior. b. their income elasticity of demand is zero. c. the good is not normal. d. no conclusions can be made without knowing the person’s initial income and consumption levels.
A sound policy to combat a temporary liquidity surplus in the banking system would be
A) a reduction in the discount rate. B) a decrease in the discount rate. C) the purchase of government securities by the Fed under a repurchase agreement. D) the sale of government securities by the Fed under a repurchase agreement.
The market for chewing gum is competitive with a current price of 50 cents per pack and a quantity of 100,000 packs per day. Which of the following events would lead to a new equilibrium price of 75 cents and a new equilibrium quantity of 125,000?
a. an increase in the price of other kinds of candy b. an increase in the price of the ingredients used to make chewing gum c. an agreement by workers in the chewing gum industry to work for lower wages d. a decrease in the number of young people in the population e. a decrease in income
The money multiplier is potential because
a. the legal reserve requirement is never precisely set b. banks might not be able to lend out all of their excess reserves c. banks always lend all of their excess reserves d. banks are prohibited from lending out all of their excess reserves e. banks can only lend out an amount equal to their required reserves