In the classical model, a temporary increase in government purchases causes the new equilibrium to have
A. more employment and a lower real wage than before.
B. less employment and a higher real wage than before.
C. more employment and a higher real wage than before.
D. less employment and a lower real wage than before.
Answer: A
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When a collective consumption good become congested _____
a. nothing happens b. it moves closer towards being a purely private good c. free riding becomes more of a problem d. exclusion becomes impossible
If your bank receives a demand deposit of $20,000 and the banking system makes the maximum possible loans, which is $60,000 . then the potential money multiplier must be
a. 2 b. 2.5 c. 3 d. 3.5 e. 4
In the short-run Keynesian model where the marginal propensity to consume is 0.75, to offset an expansionary gap resulting from a $1 billion increase in autonomous consumption, transfers must be:
A. increased by $1.33 billion. B. increased by $1 billion. C. decreased by $1.33 billion. D. decreased by $1 billion.
Explain why an investor cannot simply compare the size of promised payments from different investments, even if the interest rates and other risk factors are the same.
What will be an ideal response?