Refer to Figure 26-5. In the figure above, the movement from point A to point B in the money market would be caused by
A) an open market sale of Treasury securities by the Federal Reserve.
B) an increase in the price level.
C) a decrease in real GDP.
D) an increase in the required reserve ratio by the Federal Reserve.
B
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Lucy buys only magazines and CDs. Both are normal goods. Lucy's income decreases, but the prices of magazines and CDs do not change. Marginal utility theory predicts that Lucy will ________
A) buy fewer magazines and fewer CDs B) substitute magazines for CDs C) increase her marginal utility from both magazines and CDs by buying more magazines and CDs D) buy more magazines and more CDs
If a 1 percent change in the price of a good causes a 1 percent change in the quantity demanded of that good, then the demand is said to be:
a. perfectly elastic. b. income elastic. c. unit-elastic. d. inelastic. e. perfectly inelastic.
Describe some of the steps used to combat inflation. What are their side-effects?
An increase in government spending without any increase in taxes
A. does not increase aggregate demand. B. causes investment spending to increase. C. requires additional government borrowing. D. would effectively eliminate an inflationary gap.