Consumption has fallen substantially in Techland due to pessimism among households. What will be the outcome if a contractionary monetary policy is adopted during this period?
What will be an ideal response?
If a contractionary monetary policy is adopted during this period, consumption and investment will fall further. This is because a fall in money supply will lead to a fall in the aggregate price level. If output prices fall, firms will reduce production and lay off workers. As a result, consumption will fall. Investment will also fall if the government adopts a contractionary monetary policy because a decrease in money supply will lead to an increase in interest rates.
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Refer to the figure above. If the government institutes a minimum wage rate at $30, the unemployment in the market will be:
A) 25 units of labor. B) 10 units of labor. C) 15 units of labor. D) 20 units of labor.
We assume that in the long run in a perfectly competitive market:
A. the firms can enter or exit. B. the number of firms is fixed. C. the price will be constant. D. collusion will set in without government regulation.
Other things being equal, an increase in the rate of interest causes a(n):
A. upward movement along the demand for money curve. B. downward movement along the demand for money curve. C. rightward shift of the demand for money curve. D. leftward shift of the demand for money curve.
In 2018, the poverty threshold for a family of four in the United States was $24,755.
Answer the following statement true (T) or false (F)