The equilibrating force in the credit market in the classical model is
A. the interest rate.
B. the price level.
C. fiscal policy.
D. full employment.
Answer: A
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Suppose the government increases lump-sum taxes. This causes
A) consumption spending to decrease and spending on imports to increase. The effect on aggregate demand depends on whether domestic spending or spending on imports decreased the most. B) disposable income to decrease, which causes consumption spending to decrease and aggregate demand to decrease. C) government spending to decrease, which causes aggregate demand to decrease. D) disposable income to decrease, which causes aggregate supply to decrease.
Adjustments in ________ take the economy from the short-run equilibrium to the long-run equilibrium
A) imports and exports B) wages and prices C) the multiplier D) interest rates
The opportunity cost of postponing income to some future time depends on the interest rate
a. True b. False Indicate whether the statement is true or false
According to Keynesians, an increase in the money supply will have its least impact on GDP when the aggregate demand curve intersects:
A. the horizontal portion of the aggregate supply curve. B. the vertical portion of the aggregate supply curve. C. the upward sloping portion of the aggregate supply curve. D. either the horizontal or upward sloping portion of the aggregate supply curve.