The basic classical model can account for the procyclical behavior of money if there
A. is reverse causation from future output to money.
B. are rational expectations among the public.
C. are propagation mechanisms in the economy.
D. are real business cycles caused by productivity shocks.
Answer: A
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A decrease in autonomous investment of $100 that occurs when the marginal propensity to save (MPS) equals 0.25 will lead to a decrease in real Gross Domestic Product (GDP) of
A) $800. B) $25. C) $400. D) $100.
Recall the Application about the British experience with private water companies in the nineteenth century to answer the following question(s).Recall the Application. The British experience with water privatization showed that:
A. a single firm providing water will be profitable, but two firms will not. B. two or more firms providing water will be profitable, but a single firm will not. C. it does not matter how many firms provide water, as none will be profitable. D. it does not matter how many firms provide water, as all will be profitable.
Use the above figure. When the budget line rotates from "b" to "c"
A. the price of product J increases. B. the price of product K decreases. C. the price of product J decreases. D. the price of product K increases.
An increase in the price of product X causes a decrease in the quantity demanded for product X. One basic explanation for this is:
A. The law of increasing opportunity cost B. The price-elasticity effect C. The law of supply D. The law of diminishing marginal utility