If you were a supply-side economist, you would argue that
a. reductions in government spending cut basic public goods, such as roads which hurts the private sector, particularly private investment
b. increases in government spending stimulates the economy as a whole which would include the private sector
c. increases in government spending cause private sector investment to fall because the government competes with the private sector for investment funds and this leadsto higher interest rates
d. reductions in government spending cause private sector investment to fall because the government raises interest rates by borrowing
e. increases in private consumption is good for the private sector of the economy and for the government as well because people with more income pay more tax
C
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Keynes hypothesized that the transactions component of money demand was primarily determined by the level of
A) interest rates. B) velocity. C) income. D) stock market prices.
The nominal interest rate ________
A) makes no allowance for inflation B) is a percentage of the amount borrowed C) is the rate that most banks advertise D) all of the above E) none of the above
Suppose you observe that minor changes in supply seem to cause dramatic changes in price. You would conclude that
a. demand is unit elastic b. demand is elastic c. demand is inelastic d. demand is perfectly inelastic
Which of the following is the best example of an action that imposes an external cost?
A. Wear and tear on your car as the result of frequent use. B. Deterioration in the average quality of a house you own as the result of poor maintenance. C. Water pollution from an upstream factory that increases the cost of providing clean water to downstream residents. D. A rose garden on your property from which your neighbor gets much enjoyment.