Suppose the intersection of the IS and LM curves is to the right of the FE line. What would most likely eliminate a disequilibrium among the asset, labor, and goods markets?
A) A rise in the price level, shifting the LM curve up and to the left.
B) A fall in the price level, shifting the LM curve down and to the right.
C) A rise in the price level, shifting the IS curve up and to the right.
D) A fall in the price level, shifting the IS curve down and to the left.
A
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If the marginal propensity to consume is ________, then a $2 trillion increase in disposable income increases consumption expenditure by $1.2 trillion. If the marginal propensity to consume is ________, then a $2 trillion increase in disposable income increases consumption expenditures by $1.6 trillion.
A) 0.6; 0.8 B) 1.67; 2.25 C) 1.2; 1.6 D) 6.0; 8.0 E) None of the above because a $2 trillion increase in disposable income always leads to a $2 trillion increase in consumption expenditure.
The term quantity demanded
a. can refer to either an individual or all buyers in a market b. only refers to all buyers in a specific market c. only refers to individual buyers in a market d. refers to how many units of a good a buyer would be willing and able to purchase at a series of prices e. determines price when it intersects with the supply curve
Which of the following increases inflation and reduces unemployment in the short run?
a. either an increase in government expenditures by itself or an increase in the money supply growth rate by itself b. an increase in government expenditures, but not an increase in the money supply growth rate c. an increase in the money supply growth rate, but not an increase in government expenditures d. neither an increase in government expenditures nor an increase in the money supply
Assume that all firms in this industry have identical cost curves, and that the market is perfectly competitive.
If the market supply curve is given by S3, then in the long run firms will:
A. exit the market, leading the market supply curve to shift back to S1. B. exit the market, leading the market supply curve to shift back to S2. C. neither enter nor exit the market, so the market supply curve will remain at S3. D. enter the market, leading the market supply curve to shift back to S2.