A movement from one point to another point on the same consumption function could be caused due to
A. changes in wealth.
B. an increase in the general price level.
C. decrease in the real interest rates.
D. changes in disposable income.
Answer: D
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In the figure above, the economy is at point A when the price level rises to 120. Money wage rates and other resource prices remain constant. Firms are willing to supply output equal to
A) $15.5 trillion. B) $16.0 trillion. C) $16.5 trillion. D) None of the above answers is correct.
Comment on the following statement. "Monopolistically competitive firms will still produce in the short run even if the demand curve is below their average variable cost curve because the firms still maintain a degree of market power."
What will be an ideal response?
The supply and demand for wheat is given by QS = 200 + .2A + p and QD = 500 - p, where p is the price of wheat and A is the amount of rainfall (inches per year). The effect of an incremental increase in rainfall on equilibrium will be
A) a decrease the price of wheat by 10¢. B) a decrease the price of wheat by 20¢. C) an increase in the price of wheat by 20¢. D) an increase in the price of wheat by 10¢.
Answer the following statements true (T) or false (F)
1. The transactions demand for money will decrease when income decreases, but it is not much affected by interest rates. 2. Holding money as an asset presents a risk of capital loss. 3. There is an asset demand for money because households and business firms use money as a store of value. 4. A decrease in the nominal GDP, other things remaining the same, will decrease both the total demand for money and the equilibrium rate of interest in the economy. 5. If nominal GDP is $2,000 billion and the amount of money demanded for transactions purposes is $500 billion, then on average each dollar will be spent about four times a year.