A government policymaker suggests "Double the money supply and U.S. citizens' real incomes will double." In the long run, is this policy advice correct?
What will be an ideal response?
This statement is incorrect because in the long run an increase in the quantity of money increases only the price level. Indeed, it increases the price level by the same percentage. So if the Fed followed the advice and increased the quantity of money by 100 percent (which doubles it), then in the long run the only effect is to increase the price level by 100 percent.
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Drawbacks to using the establishment survey to calculate unemployment include all of the following except
A) the survey does not include information on self-employed persons. B) the survey may not include employment data at newly-opened firms. C) the survey provides no information on unemployment. D) the survey only includes data on full-time employees.
When a regulator is concerned about pleasing different groups in order to keep employed, this is known as the
A) share-the-gains, share-the-pains theory. B) regulatory hypothesis. C) capture hypothesis. D) creative theory.
Which of the following will cause the demand for loanable funds to increase?
A. Households increase their rate of savings. B. The expected rate of return increases. C. The cost of funds increases. D. The expected profitability of a project declines.
When Joshua's income increases, he purchases more prime-rib dinners than he did before his income increased. For Joshua, prime-rib dinners are a(n)
a. normal good. b. inferior good. c. optimal good. d. Giffen good.