Suppose the real money demand function is
Md/P = 2400 + 0.2Y - 10,000 (r + ?e).
Assume M = 5000, ?e = .03, and Y = 5000. If the price level were to decrease from 2.5 to 2.0, then the real interest rate would decrease by how many percentage points (assuming Md, ?e, and Y are unchanged)?
A) 4
B) 5
C) 9
D) 14
B
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Draw a graph of a market in equilibrium. Describe what might cause a change in demand or supply and how this would affect the diagram. Indicate how the equilibrium price and quantity will change.
What will be an ideal response?
Refer to Scenario 16.2. Is the current distribution Pareto optimal?
A) Yes. B) No, as Sam could trade Sally a piece of candy for a tee shirt and both people would be better off. C) No, as Sam could trade Sally a tee shirt for a piece of candy and both people would be better off. D) Without the prices of each commodity it is impossible to determine if this distribution is Pareto optimal.
All of the following are examples of human capital except:
A. physical strength. B. an eye for decorating and color. C. a PhD in chemistry. D. an automotive manual.
The GDP deflator is equal to.
A. nominal GDP divided by real GDP. B. nominal GDP minus real GDP. C. nominal GDP multiplied by real GDP. D. nominal GDP plus real GDP.