The economy is in long-run equilibrium when there is a correctly anticipated increase in aggregate demand. According to new classical theory, the price level will __________ and Real GDP will __________
A) fall; rise
B) rise; fall
C) fall; remain unchanged
D) rise; remain unchanged
E) remain unchanged; remain unchanged
D
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Between 1945 and 1985, the number of farms declined and the average farm size increased, both of which suggest that
a. people were eating less food b. price support programs were enriching farmers c. farm incomes decreased d. land prices decreased e. large-scale farming was more efficient than small-scale farming
A higher real interest rate ________ investment spending and ________ consumption spending.
A. increases; decreases B. decreases; decreases C. decreases; increases D. increases; increases
For a given return on assets, the lower is bank capital
A) the lower is the return for the owners of the bank. B) the higher is the return for the owners of the bank. C) the lower is the credit risk for the owners of the bank. D) the lower the possibility of bank failure.
The real risk-free interest rate is equal to:
a. The difference between the nominal interest rate and expected inflation. b. The tradeoff that society must make between consuming now and consuming later. c. The rate at which the International Monetary Fund borrows from the World Bank. d. The rate at which banks lend to their best customers (i.e., lowest credit risk). e. None of the above is correct.