For each of the following changes, what happens to the real interest rate and output in the very short run, before the price level has adjusted to restore general equilibrium?(a)Wealth rises.(b)Money supply rises.(c)The future marginal productivity of capital increases.(d)Expected inflation declines.(e)Future income declines.
What will be an ideal response?
| (a) | The IS curve shifts up and to the right, so r rises and Y rises. |
| (b) | The LM curve shifts down and to the right, so r falls and Y rises. |
| (c) | The IS curve shifts up and to the right, so r rises and Y rises. |
| (d) | The LM curve shifts up and to the left, so r rises and Y falls. |
| (e) | The IS curve shifts down and to the left, so r falls and Y falls. |
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National income (NI) is calculated by adjusting GDP for: a. depreciation
b. investment and net exports. c. Social Security insurance contributions and transfer payments. d. corporate and personal income taxes.
If a profit-maximizing monopolistic competitor earns positive economic profits in the short run: a. demand will become increasingly inelastic as new firms enter. b. the firm should increase its output as new firms enter
c. there must be barriers to entry into the industry. d. new firms will be attracted to the industry. e. both b. and d. are correct.
Which of the following summarizes the limitations of monetary policy?
A. The Fed is most effective at influencing long-term interest rates but is unable to have a short-run impact on the economy. B. The Fed directly sets all interest rates, but no interest rate has any short-run effect on the economy. C. The Fed can directly influence many different interest rates, but it can only influence them a little bit. D. The Fed has a lot of control over just one interest rate, and interest rates influence economic activity in the short run only.
On the "demand side" of a market, consumers indicate what they are willing to buy, in what quantity and at what price.
Answer the following statement true (T) or false (F)