If a positive permanent supply shock were to occur, the resulting equilibrium would be a:
A. higher level of output at lower prices.
B. lower level of output and prices.
C. higher level of output and prices.
D. lower level of output at higher prices.
Answer: A
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Which of the following measures is the best measure of money as a medium of exchange?
A) M1 B) M2 C) M3 D) None of the above
Which of the following does NOT shift the IS curve?
A) an increase in autonomous consumption B) an increase in government spending C) a decline in government spending D) a fall in the interest rate
Consumers buy less of a good as its price increases because
a. production costs have risen. b. substitute goods are now relatively cheaper. c. the income of consumers has effectively risen. d. the higher price will make the good more valuable to each consumer.
An unanticipated shift to a more expansionary monetary policy by the Fed will
a. increase real interest rates and, thereby, reduce investment, current consumption, and aggregate demand. b. reduce real interest rates, leading to an appreciation of the dollar and an expansion in net exports and aggregate demand. c. increase real interest rates, leading to higher asset prices that will stimulate aggregate demand. d. reduce real interest rates and, thereby, stimulate investment, current consumption, and aggregate demand.