Increased present saving:
A. comes at the expense of reduced current investment.
B. comes at the expense of reduced current consumption.
C. can only occur if the government increases the amount of money in circulation.
D. is only possible if the economy is experiencing positive growth in real GDP.
Answer: B
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Your roommate argues that he can think of no better situation than living in a deflationary economy, as prices of goods and services would continuously fall. You disagree and argue that during a deflation, people can be made worse off because
A) the value of the real interest rate will drop below the nominal interest rate. B) borrowers will have to pay increasing amounts in real terms over time. C) the purchasing power of people's incomes would increase. D) the purchasing power of the currency would decrease.
In the view of the new classical economists, an increase in the money stock will affect real output and employment only if the increase in the money stock
a. was caused by an aggregate supply shock. b. is accompanied by an expansionary fiscal policy shift. c. was anticipated. d. was unanticipated.
Scarcity is caused by
A) unlimited wants running up against limited economic resources. B) lazy workers. C) an individual's budget that is insufficient to cover the expenses of certain goods or services. D) shortages.
The gap that exists when equilibrium real Gross Domestic Product (GDP) is greater than full employment real Gross Domestic Product (GDP) is called a(n)
A) employment gap. B) inflationary gap. C) recessionary gap. D) demand gap.