In the above figure, if the price of good A falls from P0 to P1 and the demand for good B increases from D0 to D1, then goods A and B
A) are substitute goods.
B) are inferior goods.
C) will have a negative cross elasticity of demand.
D) are both price elastic but not perfectly price elastic.
C
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When there is an expansionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; expand B. increase; raise; decline C. decline; lower; decline D. decline; raise; decline
The following diagram shows the rate of inflation each year during a five year span. Use this diagram to answer the next question.
In which year did prices go down?
A. Year 1 B. Year 2 C. Year 3 D. Year 4
Assuming all else equal, if there is a contraction in the quantity of bank account balances, it will cause:
A) a downward movement along the demand curve for reserves. B) a leftward shift in the demand curve for reserves. C) a rightward shift in the demand curve for reserves. D) an upward movement along the demand curve for reserves.
If there is a recession, the Fed would most likely encourage banks to provide loans by:
a. buying government securities. b. raising the discount rate. c. selling government securities. d. raising the federal funds rate.