The Keynesian cause-and-effect sequence predicts that an increase in the money supply will cause interest rates to:
A. fall, boosting investment and shifting the AD curve rightward, leading to an increase in real GDP.
B. fall, cutting investment and shifting the AD curve leftward, leading to a decrease in real GDP.
C. rise, cutting investment and shifting the AD curve rightward, leading to an increase in real GDP.
D. rise, boosting investment and shifting the AD curve rightward, leading to an increase in real GDP.
Answer: B
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The fraction of a change in disposable income that is spent on consumption is the
A) marginal propensity to consume. B) marginal dissaving ratio. C) expected future disposable income. D) marginal buying power of money. E) marginal propensity to dissave.
If Ed is willing to pay a maximum of $200 for a tweed sport coat but buys one for $180, that $20 saved is
a. his reservation price b. the store's producer surplus c. his total expenditure d. his marginal utility e. his consumer surplus
The rapid development of Internet technologies during the 1990s allowed businesses to produce goods and services more cheaply than before and also gave rise to completely new services. We would show this change in the AD/AS model by moving the short-run aggregate:
A. supply curve up with little change in aggregate demand. B. supply curve down (to the right) with little change in aggregate demand. C. demand curve right with little change in short-run aggregate supply. D. demand curve left with little change in short-run aggregate supply.
If a basket of goods costs 10 dollars in the United States and 11 euros in Belgium, then purchasing power parity will exist if the exchange rate between the euro and the dollar is:
A. 11 euros per dollar. B. 1.1 dollars per euro. C. 10 dollars per euro. D. 1.1 euros per dollar.