The Gibson Paradox shows that:
a. Central banks face a paradox when they want to stimulate their economies because consumers may not spend the newly created money.
b. When monetary policy is loose and expected inflation rises, the nominal interest rate rises rather than falls.
c. When fiscal policy is loose (i.e., high government spending and falling tax rates), society as a whole is more willing (not less willing) to give up consumption today for consumption in the future.
d. When expected inflation rises, nominal interest rates fall rather than rise.
e. When expected inflation falls, government spending tends to increase, rather than decrease, as is frequently assumed.
.B
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Which of the following firms is most likely to have a constant marginal cost?
A) A firm that is a price taker B) A firm that has extremely high fixed costs C) A firm that has extremely high variable costs D) A firm that faces a horizontal demand curve
Refer to the above figure. The classical aggregate supply curve is represented by ________ and the Keynesian short-run aggregate supply curve is represented by ________
A) curve 2; curve 1 B) curve 2; curve 3 C) curve 3; curve 4 D) curve 2; curve 4
If the MPC is 2/3, then 2/3 of the effect of an increase in government purchases on aggregate demand will come from increased consumption
a. True b. False Indicate whether the statement is true or false
Absolute advantage occurs when one nation can produce a good ____ its trading partners.
A. in larger quantities than B. faster than C. that is desired by D. more efficiently than