What are the direct and indirect effects of an increase in the money supply?
What will be an ideal response?
The direct effect of more money in the economy is to induce people to buy more goods and services, causing consumption expenditures to increase and aggregate demand to increase. The indirect effect is to increase reserves as people put some of the extra funds into transactions accounts. Banks want to make more loans, causing interest rates to fall. Consumer expenditures and business investment spending increase indirectly as the rise in reserves raises the money supply and pushes down the interest rate. Either way, the aggregate demand curve would shift out.
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Social regulation is focused on all of the following EXCEPT
A) the impact of production on the environment and society. B) better working conditions, and safer and better products. C) a better quality of life through a less polluted environment. D) ensuring costs are minimized and benefits are maximized.
Suppose a country with a large domestic textile industry removed all tariffs on imported textiles, we would expect domestic:
A. textile prices to decline. B. textile production to increase. C. textile employment to increase. D. textile prices to rise.
What is the most likely reason that milk sold in convenience stores is more expensive than milk sold in grocery stores?
A. Convenience stores sell milk in smaller packages, so the per-gallon packaging costs are higher. B. Grocery stores buy in bulk, while convenience stores buy milk in smaller quantities. C. People who buy milk at convenience stores tend to have a less elastic demand for milk. D. Convenience store owners are greedier than grocery store owners.
A tariff ______ the world supply of a good.
Fill in the blank(s) with the appropriate word(s).