The graph illustrates the demand for peanuts. Peanuts are a normal good because the
A) demand curve shows that if the price of peanuts rises, there is a movement along the demand curve to a lower quantity demanded.
B) demand for peanuts increases when income increases.
C) demand for peanuts increases when the price of one of its substitutes rises.
D) demand curve for peanuts slopes downward.
E) peanuts have both substitutes and complements.
B
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Suppose the economy was in equilibrium, and the national government increased spending by $200 billion. Monetarist theory would predict that the:
a. Long-term real GDP growth rate will rise. b. Long-term real GDP growth rate will fall. c. Long-term real GDP growth rate will remain unchanged. d. Long-term inflation rate will fall. e. The international value of the domestic currency will fall.
Moral hazard can be avoided by:
A. removing the asymmetric information. B. employers monitoring employee effort. C. employers incentivizing employees to maintain consistent effort. D. All of these statements are true.
Suppose wages increase but employment decreases. These changes most likely were caused by:
A. a decrease in labor demand. B. a decrease in labor supply. C. an increase in labor demand. D. an increase in labor supply.
Assuming all excess reserves are loaned out, currency holdings by the public are zero, and a reserve ratio of 2 percent, an initial deposit of $500 will lead to a total increase in deposits of:
A. $250. B. $5,000. C. $25,000. D. $50,000.