Suppose a country has only a sales tax. Now suppose it replaces the sales tax with an income tax that includes a tax on interest income. This would make equilibrium
a. interest rates and the equilibrium quantity of loanable funds rise.
b. interest rates rise and the equilibrium quantity of loanable funds fall.
c. interest rates fall and the equilibrium quantity of loanable funds rise.
d. interest rates and the equilibrium quantity of loanable funds fall.
b
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Traveler's checks are included in
A) M1 only. B) M2 only. C) both M1 and M2. D) neither M1 nor M2.
Tom is buying a quantity of wheat at which the marginal utility (in dollars) exceeds price. He should
A. reduce wheat consumption, thus raising P to the level at which MU = P. B. reduce wheat consumption, thus raising MU to the level at which MU = P. C. increase wheat consumption, thus raising P to the level at which MU = P. D. increase wheat consumption, thus lowering MU to the level at which MU = P.
Which of the following is not an assumption made by the dynamic model of aggregate demand and aggregate supply?
A) The short-run aggregate supply curve shifts to the right except during periods when workers and firms expect higher wages. B) The aggregate demand curve shifts to the right during most periods. C) Aggregate demand and potential real GDP decrease continuously. D) Potential real GDP increases continuously.
The interest-rate effect is the impact on real GDP caused by the direct relationship between the interest rate and the:
a. price level. b. exports. c. consumption. d. investment.