If the government lowered the capital gains tax, what would be the effect in the loanable funds market? (Assume the government does not run a budget deficit.)
a. Both the supply and demand for funds would increase, lowering the interest rate and raising investment spending.
b. The supply of funds would decrease, raising the interest rate and lowering investment spending.
c. The supply of funds would decrease, lowering both the interest rate and investment spending.
d. The supply of funds would increase, lowering both the interest rate and investment spending.
e. The supply of funds would increase, lowering the interest rate and raising investment spending.
E
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What will be an ideal response?
According to classical theory, a shift in aggregate demand will affect
A) the price level only. B) real Gross Domestic Product (GDP) only. C) the level of employment only. D) both real Gross Domestic Product (GDP) and the level of employment.
During the Great Depression, the United States economy operated ______________ the production possibilities frontier.
Fill in the blank(s) with the appropriate word(s).
Which of the following is a correct characterization of socialism?
A. Tradition answers the basic economic questions. B. Markets are used exclusively to answer the basic economic questions. C. Central planning is seldom used to answer the basic economic questions. D. Government ownership of many resources and centralized decision-making answers the basic economic questions.