When the economy operates below full employment, an increase in government spending must crowd out another component of GDP
Indicate whether the statement is true or false
FALSE
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Refer to the figure above. If there is downward wage rigidity in the market, what is the wage rate at which wages will be held, everything else remaining unchanged?
A) $25 B) $10 C) $30 D) $15
Which of the following statements about junk (high-risk) bonds is true?
A) They never outperform treasury bonds since they're too risky. B) The price of junk bonds increase as their perceived risk increases. C) They tend to perform best during recessions. D) One can profit by owning them if market perceptions of their risk decline.
If resources are owned by individuals instead of government,
a. resources will be used less efficiently. b. resource use will tend to be unchanging and determined by historical usage patterns. c. resource use will be guided by changing relative prices as owners attempt to maximize self-interest. d. market prices will not reflect changing values of different uses of the resources. e. none of the above answers are correct.
Assume that the FE curve is flatter than the LM curve. A negative internal shock shifts the IS curve leftward. Under zero sterilization, which one of the following will happen next?
A. Because of the incipient balance of payments surplus, the IS curve will shift rightward. B. Because of the incipient balance of payments deficit, the LM curve will shift leftward. C. Because of the incipient balance of payments deficit, the IS curve will shift leftward. D. Because of the incipient balance of payments surplus, the LM curve will shift rightward.