If the Fed wants to stimulate aggregate demand it should _____ bonds to _____ the money supply.
A. buy; increase
B. sell; increase
C. buy; decrease
D. sell; decrease
A. buy; increase
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Investment spending is a potent force in the macroeconomy, because ________
A) it is subject to large fluctuations B) it is larger than other spending categories C) it is the focus of macroeconomic policies D) it expresses entrepreneurial talent
If import restrictions prohibit foreigners from selling various goods in the U.S. market,
a. the United States will be able to export more goods abroad. b. foreigners will have fewer U.S. dollars with which to buy goods from Americans. c. the United States will be able to produce a larger output than would otherwise be the case. d. the domestic producers in the protected industries will supply goods to U.S. consumers at lower prices than would otherwise be the case.
The theory of liquidity preference assumes that the nominal supply of money is determined by the
a. level of real output only. b. interest rate only. c. level of real output and by the interest rate. d. Federal Reserve.
Consider the supply and demand graph below to answer three questions: (a) Use a letter to identify the area of maximum consumer surplus; (b) Use a letter to identify the area of maximum producer surplus; (c) Why is the output level shown by the vertical
dashed line one that is allocatively efficient from a marginal cost and marginal benefit perspective? What will be an ideal response?