The idea that higher prices reduce the purchasing power of financial assets and lead to less consumption and more saving is known as the
a. real wealth effect
b. interest rate effect
c. foreign purchases effect
d. income effect
e. aggregate demand effect
A
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According to the theory based on rational expectations and flexible wages and prices,
A) only the combination of discretionary fiscal policy and conservative monetary policy can affect real GDP in the long run. B) neither fiscal nor monetary policy influence real GDP in the long run. C) fiscal policy has less effect on real GDP than monetary policy in the long run. D) monetary policy has less effect on real GDP than fiscal policy in the long run.
In the permanent-income hypothesis incorporating rational expectations, the short-run MPC is high when changes in current income
A) are small. B) are considered a good predictor of future income changes. C) are considered a poor predictor of future income changes. D) occur when the economy is nearing cyclical peaks or troughs.
Which of the following was not a typical characteristic of subprime mortgages?
a. low down payments b. loans to borrowers with poor credit histories c. limited incomes with which to make loan payments d. fixed interest rates
On May 12, 2011, it cost U.S. $1.64 to buy one British pound. How many British pounds would U.S. $1 buy?
a. 0.56 b. 0.61 c. 1.64 d. 2.64