Suppose the economy is operating below its full employment level. The Fed
A. can move the economy toward the full employment level by expanding the money supply to increase aggregate supply.
B. can move the economy toward the full employment level by expanding the money supply to increase aggregate demand and to hold prices constant.
C. can move the economy toward the full employment level by expanding the money supply to increase aggregate demand through both its direct and its indirect effects.
D. is powerless to affect either aggregate demand or aggregate supply. Fiscal policy is needed.
Answer: C
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A planned economy would require decisions on the basis of
a. input-output tables b. corporate profits c. cost-benefit analysis d. government decisions e. all of the above
Usury laws lead to
A. a surplus of loanable funds. B. a shortage of loanable funds. C. a floor under interest rates. D. more lenders than borrowers.
If the market for Czech restaurants is making a large economic profit, which of the following examples would most likely be a direct consequence?
a. New French restaurants will enter the market. b. Existing French restaurants will leave the market. c. New Czech restaurants will enter the market. d. Existing Czech restaurants will leave the market.
On a diagram where the interest rate and the quantity of money demanded are shown on the vertical and horizontal axes respectively, the asset demand for money can be represented by:
A. a line parallel to the horizontal axis. B. a vertical line. C. a downsloping line or curve from left to right. D. an upsloping line or curve from left to right.