A lower real interest rate ________ investment spending and ________ consumption spending.
A. increases; decreases
B. decreases; decreases
C. decreases; increases
D. increases; increases
Answer: D
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Of the three major economic questions, which of the following is the best example of a "What?" question?
A) Should we make faster microprocessors or pest-resistant corn? B) Should higher-income or lower-income people buy SUVs? C) What should doctors be paid? D) Should automobiles be produced using workers or robots? E) Should migrant workers or domestic workers be used to pick grapes?
Colorado experiences a record snowfall during the winter season. What impact will this have on the market for snowmobiles?
a. The supply of snowmobiles will increase and the price of snowmobiles will increase. b. The supply of snowmobiles will increase and the price of snowmobiles will fall. c. The demand curve for snowmobiles will decrease and the price of snowmobiles will fall. d. The demand curve for snowmobiles will increase and the price of snowmobiles will rise.
An economy has full-employment output of 5000. Government purchases are 1000. Desired consumption and desired investment are given by Cd = 3000 - 2000r + 0.10Y Id = 1000 - 4000rwhere Y is output and r is the expected real interest rate. (a)Find the real interest rate that clears the goods market. Assume that output equals full-employment output.(b)Calculate the amount of saving, investment, and consumption in equilibrium.(c)If a shock to wealth causes desired consumption to decline by 200 (so that the new equation for desired consumption is Cd = 2800 - 2000r + 0.10Y), find the equilibrium real interest rate, saving, investment, and consumption.
What will be an ideal response?
The short-run Phillips curve shifted during the 1970s primarily because of
A. easy fiscal policy. B. the two large oil price shocks. C. the changing demographics of the population. D. tight monetary policy.