Suppose a liquidity trap situation exists. Which of the following is most likely to occur if taxes are cut?
A) no change in output and no change in the interest rate
B) an increase in output and an increase in the interest rate
C) an increase in output and little change in the interest rate
D) an increase in output and a reduction in the interest rate
E) none of the above
C
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Consider the demand curves for soft drinks shown in the figure above. Suppose the economy is at point a. Which of the following could result in a movement to point c?
A) a decrease in income B) an increase in the relative price of a soft drink C) a decrease in the relative price of a soft drink D) a decrease in the price of bottled water
The table above shows the demand and costs for a single-price monopolist. The firm will
A) maximize profit by producing 3 units. B) maximize profit by producing 2 units. C) operate on the inelastic portion of its demand curve. D) operate on the unit elastic portion of its demand curve.
The wage rate needed to generate enough earnings to reach the 4-person poverty line is often referred to as the "working wage"
Indicate whether the statement is true or false
Liquidity preference theory is most relevant to the
a. short run and supposes that the price level adjusts to bring money supply and money demand into balance. b. short run and supposes that the interest rate adjusts to bring money supply and money demand into balance. c. long run and supposes that the price level adjusts to bring money supply and money demand into balance. d. long run and supposes that the interest rate adjusts to bring money supply and money demand into balance.