Suppose people become so convinced that interest rates cannot fall further that they hold money rather than bonds. This situation is
A. known as a liquidity trap
B. shown by making the aggregate demand curve steeper
C. shown as a leftward shift in the investment demand
D. known as crowding out
Answer: A
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For the CPI to provide an accurate measure of the prices paid by urban consumers, it is necessary to
A) have a market basket that is consistent and corresponds to what households actually purchase. B) make certain that the incomes of the consumers surveyed do not change because such a change would affect the market basket of the goods and services they buy. C) change the market basket each month to reflect the changes that consumers make. D) assign equal weights to all the goods and services included in the market basket surveyed so that nothing is over-weighted. E) have prices stated in dollars so consumers can compare what they spend.
Define the following terms and explain their importance to the study of macroeconomics:
a. velocity b. equation of exchange c. monetarism d. automatic stabilizer
A firm operating in a purely competitive resource market faces a resource supply curve that is:
A. perfectly inelastic. B. perfectly elastic. C. highly inelastic. D. highly elastic.
The risk premium of a financial asset is the:
A. additional price that must be paid for riskier investments. B. rate that compensates for risk. C. rate that compensates for the risk of inflation. D. same as the discount rate.