An increase in the money supply:
a. will definitely result in inflation if unemployment is high and there is much unused industrial capacity.
b. shifts the aggregate demand curve to the left
c. will probably result in inflation if the economy is fully employed.
d. causes interest rates to rise.
c
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The interest rate on a consol equals the
A) price times the coupon payment. B) price divided by the coupon payment. C) coupon payment plus the price. D) coupon payment divided by the price.
Economists have focused more attention on the formation of expectations in recent years. This increase in interest can probably best be explained by the recognition that
A) expectations influence the behavior of participants in the economy and thus have a major impact on economic activity. B) expectations influence only a few individuals, have little impact on the overall economy, but can have important effects on a few markets. C) expectations influence many individuals, have little impact on the overall economy, but can have distributional effects. D) models that ignore expectations have little predictive power, even in the short run.
Government agencies often regulate the price natural monopolies charge because, if left unregulated, natural monopolies will:
A. charge a price greater than average cost. B. charge a price less than average cost. C. charge a price equal to average cost. D. face too many competitors.
Suppose the consumption equation is represented by the following: C = 250 + .75YD. Now assume government spending increases by 100 for the above economy. Given the above information, we know that equilibrium output will increase by
A) 200. B) 400. C) 800. D) 1000. E) none of the above