Suppose that the central bank must follow a rule that requires it to increase the money supply when the price level falls and decrease the money supply when the price level rises. If the economy starts from long-run equilibrium and aggregate supply shifts left, the central bank must
a. decrease the money supply, which will move output back towards its long-run level.
b. decrease the money supply, which will move output farther from its long-run level.
c. increase the money supply, which will move output back towards its long-run level.
d. increase the money supply, which will move output farther from its long-run level.
b
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The marginal propensity to consume (MPC) is equal to
A) 1 + MPS. B) 1 - MPS. C) MPS + 1. D) MPS - 1.
List the four criteria that are generally used to evaluate economic outcomes
What will be an ideal response?
Suppose a banking system has $200 million in deposits, a required reserve ratio of 10 percent, and total bank reserves of $35 million. Then the potential increase in deposit creation for the whole banking system is equal to
A. $3 million. B. $0. C. $15 million. D. $150 million.
All of the following are incomes earned in the factor market EXCEPT
A. prices of goods and services. B. rents. C. profits. D. wages.