The income-expenditure multiplier leads to greater than one-for-one changes in output when autonomous spending changes because:
A. autonomous spending supports more output than induced spending.
B. multiple deposits are generated when new reserves are produced through fractional reserve banking.
C. planned changes in inventories signal producers to adjust the level of output.
D. the direct changes in spending change the income of producers which leads to additional changes in spending.
Answer: D
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Demand is perfectly inelastic when
A) shifts in the supply curve results in no change in price. B) the good in question has perfect substitutes. C) shifts of the supply curve result in no change in quantity demanded. D) shifts of the supply curve result in no change in the total revenue from the quantity sold.
Banks responded to disintermediation by
A) supporting the elimination of interest rate regulations, enabling them to better compete for funds. B) opposing the elimination of interest rate regulations, as this would increase their cost of funds. C) demanding that interest rate regulations be imposed on money market mutual funds. D) supporting the elimination of interest rate regulations, as this would reduce their cost of funds.
If at the prevailing interest rate the quantity of money demanded is $2 trillion, and the supply of money is $1.5 trillion, then which of the following istrue?
a. There is a shortage of money, and consequently interest rates must fall in order to achieve an equilibrium in the money market. b. There is a surplus of money, and consequently interest rates must fall in order to achieve an equilibrium in the money market. c. There is shortage of money, and consequently interest rates must rise in order to achieve an equilibrium in the money market. d. There is a surplus of money, and consequently interest rates must rise in order to achieve an equilibrium in the money market.
Depreciation must be subtracted from the calculation of gross domestic product
a. True b. False Indicate whether the statement is true or false