Suppose the economy is initially in long-run and short-run equilibrium. If the Fed decides to pursue a contractionary monetary policy, we will see
A) bond prices fall, interest rates fall, aggregate demand remains unchanged as consumption spending decreases, but investment spending increases. GDP remains constant in both the short run and the long run, but the price level falls in both.
B) bond prices fall, interest rates rise, aggregate demand falls as investment and consumption spending decrease, and real GDP and the price level decreasing in the short-run, but only the price level decreasing in the long run.
C) bond prices fall, interest rates rise, aggregate demand falls as investment spending decreases and consumption spending remains unchanged, and real GDP and the price level decrease in the short run, but only the price level falls in the short run.
D) interest rates rise but no change in bond prices. Aggregate demand falls as consumption spending and investment spending decrease, and the price level and real GDP fall in both the short run and the long run.
B
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A fall in which of the following would increase the money multiplier?
a. The monetary base b. A change in M1 c. The level of Federal Reserve open market purchases d. An increase in the currency to checkable deposit ratio e. All of the above
Refer to the above figure. Suppose the equilibrium moves from E' to point E. An event that could have caused this movement is
A) an increase in the real interest rate in the United States. B) an increase in U.S. productivity. C) an increase in the perceived stability of the U.S. economy. D) an increase in demand for Japanese-produced goods by U.S. residents.
If the aggregate demand curve shifts to the left and the aggregate supply curve shifts to the right, the result will be a
a. decrease in the level of output. b. decrease in the price level. c. higher price level. d. higher unemployment rate.
Suppose that some country had an adult population of about 46 million, a labor-force participation rate of 75 percent, and an unemployment rate of 8 percent. How many people were unemployed?
a. 2.54 million b. 2.76 million c. 3.68 million d. 8 million