The IS curve is Y = 20 - 1.5r, and the aggregate demand curve is Y = 15.5 - 0.3?. When the interest rate is 7 percent, the inflation rate is ________ percent
A) 14.6
B) 9.5
C) 3.6
D) 20
E) none of the above
D
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An increase in the real interest rate would cause an increase in the real demand for money
A) no matter what the change in expected inflation. B) if expected inflation fell by less than the rise in the real interest rate. C) if expected inflation fell by the same amount as the rise in the real interest rate. D) if expected inflation fell by more than the rise in the real interest rate.
At the equilibrium price
a. only sellers who value the product more than the equilibrium price would be willing to sell b. only buyers who value the product less than the equilibrium price would be willing to buy c. only buyers who value the product more than the equilibrium price would be willing to buy d. None of the parties would be willing to trade
In an economy consisting of only two goods, corn and cloth, the amount of extra cloth that can be produced efficiently if corn output is reduced by one unit is equal to
a. the rate of technical substitution for corn divided by the rate of technical substitution for cloth. b. the rate of technical substitution for cloth divided by the rate of technical substitution for corn. c. the marginal cost of producing cloth divided by the marginal cost of producing corn. d. the marginal cost of producing corn divided by the marginal cost of producing cloth.
If a natural disaster were to cause a negative long-run supply shock to the economy, once the economy adjusts, the new equilibrium will be at a:
A. higher price level and lower level of output. B. lower price level and lower level of output. C. higher price level and higher level of output. D. lower price level and higher level of output.