Starting from long-run equilibrium, an increase in autonomous investment results in ________ output in the short run and ________ output in the long run.
A. lower; potential
B. higher; higher
C. lower; higher
D. higher; potential
Answer: D
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If a firm shuts down in the short run it will
A) break even. B) suffer a loss equal to its fixed costs. C) declare bankruptcy. D) suffer a loss equal to its variable costs.
If the public has correct rational expectations and the Fed increases both reserve requirements and the discount rate, it would be expected to result in: a. a higher level of real output and a lower price level. b. a lower price level but no change in real output
c. a higher price level and a reduced level of real output. d. a higher price level but no change in real output.
Jaime’s income elasticity for science fiction novels is 1.2 and for mystery novel -1. For Jaime, science fiction novels are ____________and mystery novels are ____________:
a. normal; normal b. normal; inferior c. inferior; normal d. inferior; inferior
Exhibit 20-1 Money market demand and supply curves
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As shown in Exhibit 20-1, assume the money supply curve shifts leftward from MS1 to MS2 and the economy is operating along the intermediate segment of the aggregate supply curve. The result will be a:
A. higher investment, lower real GDP, and lower price level. B. lower investment, lower real GDP, and lower price level. C. higher investment, higher real GDP, and higher price level. D. higher interest rate and no effect on real GDP or the price level.