The largest single portion of the federal budget is devoted to
A. national defense.
B. Medicare and Medicaid.
C. Social Security and unemployment compensation.
D. education.
E. interest payments on the national debt.
Answer: C
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Consumer confidence in the economy falls, and as a result, aggregate demand decreases. As real GDP falls below potential GDP, if the Fed followed Friedman's k-percent rule, the Fed would
A) increase the quantity of money more than usual. B) continue allowing the quantity of money to grow at "k" percent. C) increase government expenditures. D) lower the federal funds rate. E) raise the federal funds rate.
When there are many producers of an identical product and you have perfect and free information about what every seller is charging, eventually every merchant will
A) raise the price of the product in hopes that you will purchase the product from them. B) agree to charge a high price for the product so each will be able to earn high profits. C) charge the same price for the product, and the price will be just enough to cover costs. D) discontinue selling the product since there is so much competition.
If the Fed has a goal of stable real GDP and the government announces a tax cut, which of the following would occur?
a. Money demand would not change, real GDP would not change, the interest rate would decrease, and there would be partial crowding out. b. Money demand would not change, real GDP would not change, the interest rate would increase, and there would be complete crowding out. c. Money demand would increase, real GDP would not change, the interest rate would increase, and there would be partial crowding out. d. Money demand would not change, real GDP would increase, the interest rate would decrease, and there would be complete crowding out. e. Money demand would increase, real GDP would not change, the interest rate would decrease, and there would be complete crowding out.
Refer to the information provided in Figure 2.4 below to answer the question(s) that follow.
Figure 2.4According to Figure 2.4, as the economy moves from Point D to Point B, the opportunity cost of hybrid cars, measured in terms of motorcycles,
A. initially increases, then decreases. B. increases. C. remains constant. D. decreases.