How does an increase in the savings rate affect the multiplier in an economy, if at all?
a) The multiplier would turn from positive to negative.
b) The multiplier would stay the same.
c) The multiplier would increase.
d) The multiplier would decrease.
Ans: d) The multiplier would decrease.
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A bank's excess reserves are the fraction of a bank's deposits held at the Federal Reserve
Indicate whether the statement is true or false
Which of the following purchases is included in personal consumption expenditures when determining gross domestic product?
A) purchase of a new house because of the arrival of a new baby B) purchase of a new office building C) vacation expenses for a spring trip to Fort Lauderdale D) purchases of jeans to add to a store's inventory
The price elasticity of demand is measured as the percentage change in price divided by the percentage change in quantity demanded
Indicate whether the statement is true or false
Starting from long-run equilibrium, a large decrease in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; lower; potential B. expansionary; higher; potential C. recessionary; lower; potential D. recessionary; lower; lower