What is the multiplier effect?
What will be an ideal response?
If the government spends money to build a bridge, there must be engineers, construction workers, and many others hired to do the work. This new work increases the wages of these workers. These newly hired workers then go out and spend their wages in the community, thereby creating new jobs. This is the multiplier effect.
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To the extent that the value of money is less predictable, it becomes
A) more acceptable as a store of value. B) less acceptable as a medium of exchange. C) more acceptable as a standard of deferred payment. D) more acceptable as a unit of account.
When the price is less than the equilibrium price
A) there will be a shortage. B) some consumers will be willing to pay a price higher than the prevailing price. C) the price will be forced higher. D) All of the above answers are correct.
Assume a fixed demand for money curve and the Fed increases the money supply. The result is a temporary:
A. excess quantity of money demanded. B. excess quantity of money supplied. C. new equilibrium interest rate. D. decrease in the demand for loans.
When price level in the United States rises,
A. there is a increased demand for borrowed money. B. producers' demand for new machinery increases, contributing to an increase in aggregate demand. C. Americans tend to buy more foreign goods and services. D. the French, Canadians, and Japanese would find our exports more attractive.