A fiscal contraction will tend to cause which of the following to occur?
A) a reduction in the interest rate and a reduction in investment
B) a reduction in the interest rate and an upward shift in the LM curve
C) a reduction in the interest rate and an ambiguous effect on investment
D) no change in output if the Fed simultaneously pursues contractionary monetary policy
C
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Many people consider hot dogs to be an inferior good. For such people, all else held constant, a decrease in income would cause their demand for hot dogs to:
A) increase. B) stay the same. C) decrease. D) cannot be determined with the information given.
Explain the role of expectations in determining the impact of a supply shock.
What will be an ideal response?
If the total utility curve is a straight line, the marginal utility curve would be a:
A. an upward-sloping line with a slope of 1. B. a vertical line. C. downward-sloping line. D. a flat line with a slope of zero.
What does the phrase "owners' equivalent rent" mean?
A. It is the price of a home. B. It is the value of three years' worth of housing services. C. It is the value of a year's worth of housing services. D. It is the price of five years' worth of housing services.