An unexpected increase in aggregate demand typically causes
A. the price level to increase but has no effect on the unemployment rate.
B. frictional unemployment to increase but structural unemployment to decrease.
C. the price level to increase and the unemployment rate to fall.
D. the price level to increase and the unemployment rate to increase.
Answer: C
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To close a recessionary gap, the Fed ________ interest rates which ________ aggregate spending and ________ short-run equilibrium output.
A. reduces; increases; decreases B. raises; decreases; increases C. raises; decreases; decreases D. reduces; increases; increases
In monopolistic competition, profit is maximized when the amount produced is such that
A) marginal revenue equals marginal cost. B) marginal revenue is greater than marginal cost. C) total revenue equals total cost. D) total revenue is maximized.
One characteristic of a financial crisis caused by macroeconomic imbalances is that it
A) may or may not be predictable. B) will occur eventually even though its timing is unpredictable. C) may be caused by expansionary fiscal policies accompanied by high budget deficits. D) may be caused by high deficits financed by increases in the money supply. E) All of the above.
One problem that might occur as a result of economic regulation is
A) the firm may be earning more than a normal rate of return on investment. B) the quality of service might be lowered. C) that social regulation may follow. D) the demand for the good may be greater than the supply.