The decade of the 1920s was characterized by which of the following?
(a) Economic advancements in agriculture
(b) A decrease in the inequality of income and wealth
(c) Consumers dramatically shifted their household demands into
purchases of durable goods on credit
(d) All of the above characterized the decade of the 1920s
(c)
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When the economy is hit by a negative demand shock and the central bank pursues policies to increase aggregate demand to its initial level, then
A) inflation will be lower. B) output will be at its potential. C) output will be lower. D) inflation will be unchanged. E) both B and D.
According to the liquidity premium theory, if market participants expect that inflation in the future will be lower than it currently is, the yield curve will
A) slope upward. B) be flat. C) be inverted. D) be vertical.
Under the rational expectations hypothesis, which of the following is the most likely effect of a shift to a more expansionary monetary policy?
a. In the short run, the real rate of output will be unaffected, but in the long run, it will increase. b. In the short run, the real rate of output will increase, but in the long run, it will be unchanged. c. There will be a permanent increase in the real rate of output, but the inflation rate will also be a little higher. d. In the short run, the impact on the real rate of output is uncertain; in the long run, it will remain unchanged.
If the price of inputs rises and foreign income rises:
a. Aggregate demand and aggregate supply rise. b. Aggregate demand and aggregate supply fall. c. Neither aggregate demand nor aggregate supply change. d. Aggregate demand rises, and aggregate supply falls. e. None of the above.