Use a graph to show the effects of an expansionary monetary policy moving an economy out of recession and to potential real GDP. Explain what happens to aggregate demand, real GDP, and the price level
What will be an ideal response?
If the economy is in recession, it is currently at point A, below potential real GDP. An expansionary monetary policy will shift the aggregate demand curve to the right from AD1 to AD2, increasing real GDP and the price level until it reaches potential real GDP at point B.
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Refer to the scenario above. If Joseph prefers more money to less, ________
A) he will not accept any offer made by Phillip B) he will always accept any offer made to him C) Phillip will offer the lowest possible amount to Joseph D) he will accept the offer only if Phillip pays him an equal share of the money
Monetarists argue that the Fed should frequently adjust the money supply in response to ever-changing economic conditions
a. True b. False Indicate whether the statement is true or false
The Lorenz curve demonstrates:
A. inequality visually; the more linear the curve, the more inequality exists. B. inequality visually; the more linear the curve, the less inequality exists. C. average income levels per quintile; the more linear the curve, the more inequality exists. D. average income levels per capita; the more linear the curve, the less inequality exists.
A low exchange rate for the dollar makes foreign currencies:
A. more expensive, raising the price of imports. B. more expensive, lowering the price of imports. C. cheaper, lowering the price of imports. D. cheaper, raising the price of imports.