While the classical economists believed that both velocity and output are stable, Keynesians believe:
a. velocity and output are both variable.
b. output is stable and velocity is variable.
c. the same as the classical economists that both output and velocity are stable.
d. velocity is stable and output is variable.
a
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Based on the figure below. Starting from long-run equilibrium at point C, a decrease in government spending that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at__ creating _____gap.
A. B; no output B. D; an expansionary C. B; recessionary D. D; a recessionary
Refer to Figure 7-1. The efficient equilibrium price is
A) $30. B) $25. C) $20. D) <$20.
________ in the foreign interest rate causes the demand for domestic assets to ________ and the domestic currency to depreciate, everything else held constant
A) An increase; increase B) An increase; decrease C) A decrease; increase D) A decrease; decrease
The purpose of creating the European exchange rate mechanism (ERM) was to
A) base trade and investment on comparative advantage. B) prevent currencies from appreciating. C) create barriers to trade. D) let exchange rates float more freely.