Reduction in quantity demanded of a good when its price increases because of a consumer's decreased purchasing power is termed as:
a. income effect
b. substitution effect.
c. utility effect.
d. marginal effect.
a
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Suppose the real interest rate increases from 4 percent to 6 percent. As a result,
A) governments decrease their demand for loanable funds. B) firms increase their demand for loanable funds. C) governments increase the supply of loanable funds. D) firms decrease the quantity demanded of loanable funds. E) governments decrease the quantity supplied of loanable funds.
Monetarists have maintained the Classical tradition by emphasizing the
A) importance of government's fine-tuning policies. B) inflationary impact of government spending. C) instability of money demand. D) inherent stability of the economy.
If a "conservative" wanted to increase aggregate demand, which of the following would she tend to favor?
a. An increase in government spending, because it has a larger multiplier than tax changes. b. A decrease in transfer payments, because it keeps the public sector small. c. An increase in transfer payments, because it has a larger multiplier than tax changes. d. A decrease in taxes, because it makes the public sector smaller.
According to the law of supply, when prices increase,
a. demand increases b. quantity demanded increases c. supply increases d. quantity supplied increases