The multiplier effect refers to the fact that a change in spending (aggregate demand) will
What will be an ideal response?
cause nominal output to rise by some multiple of the initial increase in spending
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If the required reserve ratio is 10 percent, an increase in bank reserves of $1,000 can support an increase in checking account deposits (including the original deposit) in the banking system as a whole of up to
A) $100. B) $1,000. C) $10,000. D) $100,000.
When the Fed increases the money supply,
A) the interest rate rises and this stimulates consumption spending. B) the interest rate falls and this stimulates investment spending. C) the interest rate rises and this stimulates investment spending. D) people spend less because they have more money.
Which of the following statements is consistent with the views of Joseph Schumpeter?
A) An economy benefits from firms having market power because these firms are more likely to be able to commit funds for research and development. B) Enforcement of antitrust laws is necessary to promote competition among firms. C) A lack of competition discourages firms from developing new technologies. D) Research and development by competitive firms is responsible for most technological changes.
Under conditions of perfect competition, if a profitable firm pushes its output beyond the point where MR equals MC,
a. profits increase. b. profits diminish. c. AFC increases. d. AVC decreases.