If a family's MPC is 0.7, it means that the family is:
A. Operating at the break-even point
B. Spending seven-tenths of any increment to its income
C. Necessarily dissaving
D. Spending 70 percent of its disposable income
B. Spending seven-tenths of any increment to its income
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In Poland’s free market, Felix Siemienas is making a fortune in cold cuts. Prices are much higher than formerly. Siemienas says, “Yes, my prices are high. If nobody buys, I bring my prices down. That is the market rule.” This “rule” best describes
A. the law of diminishing returns. B. opportunity cost. C. the law of increasing costs. D. the law of demand.
A falling price level is called ________ and a fall in the rate of inflation is called ________
A) deflation; disinflation B) disinflation; deflation C) disinflation; a contraction D) a contraction; disinflation
A liquidity trap occurs when
A) any additions to the monetary base are held as cash by people or reserves at banks. B) the Fed increases the money supply, causing the expected inflation rate to rise more than the real interest rate declines, so that the nominal interest rate increases. C) there are runs on banks that are solvent but illiquid. D) the demand for loans increases in a country on the gold standard, so that the monetary supply is not able to increase and interest rates rise dramatically.
Starting from equilibrium and using the ISLM framework, a decrease in investment leads to
A) lower interest rates and higher income. B) higher interest rates and higher income. C) lower interest rates and lower income. D) higher interest rates and lower income.