Expansionary monetary policy _____ interest rates and _____ aggregate demand.
a) decreases; increases
b) decreases; decreases
c) increases; increases
d) increases; decreases
Answer: a) decreases; increases
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According to Okun's law, if output grew 1% and full-employment output rose 3%, what would be the change in the unemployment rate?
A) -2 percentage points B) -1 percentage point C) 1 percentage point D) 2 percentage points
The Monetarists argue that in the long run, the Phillips Curve is vertical because
A) wages and prices are flexible. B) money demand is unstable. C) investment is unstable. D) wages change more slowly than the price level.
Starting from short-run equilibrium, wage rates rise. What is the effect on the price level and Real GDP in the short run?
A) The price level rises and Real GDP falls. B) The price level falls and Real GDP rises. C) The price level rises and Real GDP rises. D) The price level falls Real GDP falls.
Refer to Figure 2-18. Which of the following could result in a movement from point B to point Z?
a. a change in the price of a restaurant meal b. a change in the number of restaurant meals demanded c. a change in income d. Both a and b are correct.