Explain in detail what effect a Fed sale of bonds will have on: (1 ) the LM curve; and (2 ) the IS curve
What will be an ideal response?
A Fed sale of bonds will cause a reduction in H and a reduction in the money supply. This will cause an excess demand for money and the interest rate must increase to restore money market equilibrium. The LM curve will shift up as a result of this to reflect the now higher interest rate. The IS curve does not shift as a result of this. We would simply observe a movement along the IS curve.
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What can we conclude if depreciation (consumption of fixed capital) exceeds gross domestic investment?
A. Net investment is negative. B. The economy is importing more than it exports. C. The economy's production capacity is expanding. D. Nominal GDP is rising but real GDP is declining.
Which EU institution has played a significant role is responding to the economic crisis that began in 2007?
What will be an ideal response?
If an excise tax is imposed on shirts,
a. the number of shirts produced will exceed the number demanded b. the number of shirts demanded will exceed the number supplied c. the equilibrium market price will decrease d. the amount consumers pay for each shirt will decrease e. the net revenue producers receive from each shirt will decrease
What is demand?
A) The idea that buyers will purchase more of a product as the price drops B) The price and quantity of a product at which the quantity demanded is equal to the quantity supplied C) The idea that producers will offer more of a product as the price rises D) The willingness and ability of buyers to purchase a product E) None of these