In response to the sharp decline in stock prices in October 1987, the Federal Reserve
a. increased interest rates, and the economy avoided a recession.
b. increased interest rates, but the economy was unable to avoid a recession.
c. decreased interest rates, and the economy avoided a recession.
d. decreased interest rates, but the economy was unable to avoid a recession.
c
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If real GDP is less than potential GDP, then the ________ and the price level ________
A) aggregate demand curve shifts leftward; rises B) aggregate demand curve shifts rightward; falls C) aggregate supply curve shifts leftward; rises D) aggregate supply curve shifts rightward; falls E) amount of potential GDP increases; falls
In computing GDP, it is essential to
A) avoid double counting. B) include government transfer payments. C) include government tax revenues. D) count all intermediate products directly as they are produced.
The inauguration of a new President often increases the degree of optimism in business firms and households, causing Ap to
A) rise and IS to shift leftward. B) fall and IS to shift leftward. C) fall and IS to increase. D) rise and IS to shift rightward.
According to monetary theories of the business cycle, fluctuations are
a. independent of the banking system. b. more prevalent in countries with modern banking systems. c. more prevalent in agricultural countries. d. less prevalent in those countries with modern banking systems.