The interest-rate-based monetary policy transmission mechanism argues that an increase in the money supply
A. causes interest rates to fall, which causes an increase in planned investment, and an increase in aggregate demand.
B. has no effect on aggregate demand but increases short-run aggregate supply.
C. has no effect on aggregate demand but reduces long-run aggregate supply.
D. causes the inflation rate to decline, which causes an increase in household consumption spending and an increase in aggregate demand.
Answer: A
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Consider two people, Sandy Smith, who earns $25,000 . and Gary Carver, who earns $50,000 . If the government has decided to tax everyone's first $25,000 at 20 percent and everyone's second $25,000 at 40 percent, then Gary pays:
a. $10,000 in taxes and Sandy pays $5,000 in taxes. b. $10,000 in taxes and Sandy pays $10,000 in taxes. c. $15,000 in taxes and Sandy pays $5,000 in taxes. d. $15,000 in taxes and Sandy pays $10,000 in taxes. e. $17,000 in taxes and Sandy pays $5,000 in taxes.
Keynes's absolute income hypothesis asserts that consumption
a. increases as income increases, but at a constant rate b. decreases as income increases, but at a constant rate c. increases as income decreases, but at a constant rate d. increases as income increases, but at a decreasing rate e. decreases as income increases, but at an increasing rate
What impact do private insurance companies and Medicare have on national medical costs?
A) Medical costs go up because insurance leads to an increase in the quantity demanded of medical services. B) Medical costs go up because insurance will lead to the reduction in the supply of medical services due to the amount of paperwork required. C) Medical cost are unaffected by insurance companies. D) Medical costs go down because the insurance company pays the bill.
The governor has proposed to clean up all trash on the side of the highway. The project is estimated to cost the tax payers and additional $15,000. The city will benefit by having a clean highway which will entice tourists to stop along their routes. The project is estimated to bring in $18,000 of revenue from the highway being cleaned. Should the governor continue with the project?
A. Yes, the tax payers wanted the highway cleaned up. B. Yes, the project will bring in $3,000 more in MB than MC. C. No, the benefit from the project will only be $3000. D. No, the project will not bring in enough benefit to cover the costs.