When the Fed reduces the money supply, it will cause a decrease in aggregate demand because:
A. real rates will rise, lowering business investment and consumer spending.
B. the dollar will depreciate on the foreign exchange market, leading to an increase in net exports.
C. lower interest rates will cause the value of assets (for example, stocks) to rise.
D. the national debt will increase, causing consumers to reduce their spending.
Answer: A
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All of the following are likely results of a negative demand shock EXCEPT
A) a negative output gap. B) lower inflation. C) IS shifts to the left. D) Phillips curve shifts to the left.
The supply and demand for wheat are given by
QS= 20 + 100p QD = 4000 - 100p +10Y Where Y is the average consumer income. a. Compute the partial derivative of quantity demand with respect to changes in average consumer income. b. Solve for the equilibrium price and quantity as functions of the consumer income. c. Compute the derivatives of the equilibrium price and quantity with respect to income.
"Crowding out" refers to federal government deficits financed by:
a. borrowing which increases interest rates and thereby reduces private spending. b. increasing taxes which reduces private spending. c. the federal government buying foreign debt which reduces the amount of government spending and government programs. d. reducing government spending which reduces interest rates.
Government can support agricultural prices by
A. subsidizing imports of a particular crop and buying up all output that consumers do not buy at the supported price. B. making it illegal to consume more than a specified amount. C. buying up all output that consumers do not buy at the supported price. D. subsidizing imports of a particular crop.