According to proponents of the interest-rate-based monetary policy transmission mechanism, any increase in the money supply
A. is effective in increasing Gross Domestic Product (GDP) only if it causes an outward shift of the aggregate supply curve.
B. causes velocity to increase, and so in the short run nominal Gross Domestic Product (GDP) must increase.
C. will increase Gross Domestic Product (GDP) only if interest rates fall and investment is sensitive to decreasing interest rates.
D. will move the economy from the "liquidity trap" during times of recession if interest rates fall enough to stimulate private investment.
Answer: C
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Which of the following is a measure of economic growth that is most useful for measuring changes in the overall size of an economy?
A. decreases in the rate of unemployment B. increases in real GDP C. increases in real GDP per capita D. growth in nominal GDP
Oil is a key input to the U.S. economy. Describe scenarios in which oil could be involved in each of the following types of shifts: a rightward shift in the short-run aggregate supply (SRAS) curve, a leftward shift in the SRAS curve, a rightward shift in the long-run aggregate supply (LRAS) curve, and a leftward shift in the LRAS.
What will be an ideal response?
For which of the following would the absolute price elasticity of demand be greatest?
A. salt B. Dr. Pepper cola C. tickets to the Super Bowl D. gasoline
Lower interest rates are likely to
A. decrease both consumer spending and consumer saving. B. have no effect on consumer spending or saving. C. increase consumer spending and decrease consumer saving. D. decrease consumer spending and increase consumer saving.