Using the ISLM model, explain and show graphically the effect of a fiscal expansion when the demand for money is completely insensitive to changes in the interest rate. What is this effect called?
What will be an ideal response?
See figure below.
This is the total crowding out effect. The LM curve is vertical, so any shift of the IS curve affects only interest rates. The level of output is constant. The fiscal expansion shifts the IS curve rightward, increasing the interest rate.
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Which types of workers are most likely to favor lowering trade barriers in the United States?
What will be an ideal response?
A firm that places its assets in the custody of a board of trustees is called a:
a. trust. b. combination. c. cartel. d. all of these.
Some competitive firms are willing to operate at a loss in the short run because their revenues are at least able to cover their variable costs
a. True b. False Indicate whether the statement is true or false
Consider the above figure. This curve suggests that as the government raises the tax rate, a point will eventually be reached at which the revenues that are collected will
A) increase. B) decline. C) approach infinity. D) become negative.