Refer to Figure 10.2. Assume the economy is initially at equilibrium at potential GDP of $500 billion. If the MPC = 0.80 , and real GDP falls to Y2 = $400 billion, the vertical distance between AE1 and AE2 must be
A) $8 billion.
B) $20 billion.
C) $80 billion.
D) $100 billion.
B
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If the Fed has announced that it plans on lowering the interest rate it will
A) engage in contractionary open market operations, thereby increasing the money supply. B) engage in contractionary open market operations, thereby decreasing the money supply. C) engage in expansionary open market operations, thereby decreasing the money supply. D) engage in expansionary open market operations, thereby increasing the money supply.
If the interest rate on Swiss franc assets increases while interest rates in the United States remain constant, the
A) quantity of dollars demanded will decrease. B) demand for dollars will increase. C) demand for dollars will decrease. D) quantity of dollars demanded will increase.
Joey cuts grass during the summer. He rents a lawn mower from his dad. Which of the following statements best illustrates the difference between the short run and the long run for Joey?
A) Joey's friends say they will help him, but when he calls them, they say they have other things to do. B) When Joey acquires more customers, he responds by working more hours. Next year, he will buy a lawn mower and split the work with his brother. C) Some customers pay Joey immediately; others wait till the following week. D) Joey has had to turn away some customers because he is already too busy.
Other things the same, a decrease in the price level makes the interest rate decrease, which leads to a depreciation of the dollar in the market for foreign-currency exchange
a. True b. False Indicate whether the statement is true or false