Which set of changes is definitely predicted to lower Real GDP in the short run?
A) The money supply rises and labor productivity rises.
B) The U.S. dollar depreciates and wage rates fall.
C) The U.S. dollar appreciates and labor productivity rises.
D) Foreign real national income falls and wage rates rise.
E) none of the above
D
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The World Bank
A) extends long-term loans for capital investment projects to developing nations. B) mediates contracts regarding minimum prices for various globally-traded commodities. C) determines the labor force participation rate in each of its member nations. D) determines the price level in each of its member nations.
Economic models
a. cannot be useful if they are based on false assumptions. b. were once thought to be useful, but that is no longer true. c. must incorporate all aspects of the economy if they are to be useful. d. can be useful, even if they are not particularly realistic.
When real GDP is less than potential GDP, an increase in government expenditures will __________ real GDP and __________ the price level
a) increase; raise b) increase; lower c) decrease; raise d) decrease; lower
According to proponents of the interest-rate-based monetary policy transmission mechanism, any increase in the money supply
A. is effective in increasing Gross Domestic Product (GDP) only if it causes an outward shift of the aggregate supply curve. B. causes velocity to increase, and so in the short run nominal Gross Domestic Product (GDP) must increase. C. will increase Gross Domestic Product (GDP) only if interest rates fall and investment is sensitive to decreasing interest rates. D. will move the economy from the "liquidity trap" during times of recession if interest rates fall enough to stimulate private investment.