If you were a Keynesian and wanted to stimulate the economy (to increase real GDP), you would
a. increase the money supply to lower the interest rate in order to increase investment
b. increase the money supply to lower the interest rate in order to decrease investment
c. decrease the money supply to lower the interest rate in order to increase investment
d. decrease the money supply, which causes consumption to increase and saving to fall
e. increase the money supply, which causes the interest rate to increase and production to increase as well
A
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Starting from long-run equilibrium, a large increase in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; potential B. recessionary; higher; potential C. recessionary; lower; lower D. expansionary; higher; higher
What are the information costs associated with forward contracts?
What will be an ideal response?
A sudden rise in the market demand in a competitive industry leads to
a. A short run market equilibrium price lower than the original equilibrium b. A market equilibrium higher than the short run price c. Entry of new firms into the market d. All of the above
Which of the following is included in M2?
A. commercial paper B. U.S. Treasury bonds C. savings accounts D. stocks