The economy is in the horizontal portion of the AS curve, there is no liquidity trap and investment is sensitive to changes in the interest rate. According to the Keynesian transmission mechanism, if the money supply drops the interest rate will __________, investment spending will __________, the AD curve will shift to the __________, and the price level will __________
A) rise; fall; left; rise
B) fall; rise; right; rise
C) rise; fall; left; not change
D) fall; fall; left; fall
E) rise; rise; left; fall
C
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Assume that business investment spending rises, and the increase is funded by greater borrowing in the capital markets. If the nation has low mobility international capital markets and a fixed exchange rate system, what happens to the reserves account and monetary base in the context of the Three-Sector-Model? a. The reserves account becomes more positive (or less negative) and monetary base
falls. b. The reserves account becomes more negative (or less positive) and monetary base rises. c. The reserves account and monetary base remain the same. d. The reserves account becomes more negative (or less positive) and monetary base remains the same. e. There is not enough information to determine what happens to these two macroeconomic variables.
An open economy's GDP is given by
A. Y = C + I + G. B. Y = C + I + G + T. C. Y = C + I + G + S. D. Y = C + I + G + NX.
Which of the following refers to the satisfaction a consumer receives from the consumption of a good?
A. Price elasticity. B. Law of demand. C. Equilibrium price. D. Utility.
Related to the Economics in Practice on page 221: Because land is demand determined, an acre of land in downtown Harlingen, Texas ________ an acre of land in downtown Chicago, Illinois.
A. would cost exactly the same as B. would most likely cost less than C. would most likely cost more than D. should cost approximately the same as