In Figure 3-7 above, a $250 increase in AP causes
A) Y to increase by $1250.
B) induced saving to increase by $250.
C) consumption to increase by $1000.
D) all of the above.
D
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Suppose that Joan, the only consumer of pork, has a downward-sloping demand curve for pork and faces an upward-sloping supply curve. If her demand curve shifts out because she develops a craving for pork, then at the new equilibrium (everything else equal),
A. the price of pork relative to other goods will be higher than before. B. Joan’s marginal utility from every unit of pork she eats will be higher than before. C. Joan’s real income will be lower than before. D. All of the responses are correct.
Banca Solida has, in the past, always operated with a reserve ratio of 25 per cent. It has now been taken over by Gung-Ho Bank which operates with a reserve ratio of 12 per cent. Assuming that Banca Solida adopts the business practices of its new owner, what will be the effect on money supply in the country in which Banca Solida operates?
a. Money supply will increase because Banca Solida will increase its loans. b. The effect on money supply cannot be determined from the information given. c. Money supply will decrease because the loans will have to be repaid. d. Money supply will be unchanged because the central bank has made no policy changes.
The aggregate expenditure line shows
What will be an ideal response?
One way the government can boost the economy out of a recession is:
A. with public announcements telling the public to save their money. B. by increasing government spending. C. by setting price ceilings on most goods so people can afford them. D. None of these will help an economy in recession.