If the Federal Reserve sells bonds, the short-run effects will be
a. an increase in the money supply and lower real interest rates.
b. a decrease in the money supply and lower real interest rates.
c. an increase in the money supply and higher real interest rates.
d. a decrease in the money supply and higher real interest rates.
D
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When there is a recessionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; decline B. increase; raise; decline C. decline; lower; expand D. decline; raise; decline
The price elasticity of demand equals magnitude of the
A) change in the price divided by the change in quantity demanded. B) change in the quantity demanded divided by the change in price. C) percentage change in the price divided by the percentage change in the quantity demanded. D) percentage change in the quantity demanded divided by the percentage change in the price.
Government policies that use taxes and government spending in an attempt to stabilize the economy are known as a. Trade policy
b. Regulatory policy. c. monetary policy. d. fiscal policy.
In general, an externality is created when
A) people are affected (other than by price) by a transaction which they were not part of. B) firms produce a product of low quality and consumers don't like it. C) firms have to pay for polluting the environment. D) the government subsidizes education.