Explain why, in a simple economy which does not include the government or taxation, saving equals investment at the equilibrium level of output
What will be an ideal response?
In this simple economy, the value of output (y) equals the value of income. Households can either consume or save income, so saving equals output minus consumption (S = y - C). In this economy, output equals consumption plus investment (y = C + I). Since y = C + I and S = y - C (or, rewritten, y = C + S), this means C + I = C + S, or saving equals investment (S = I).
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An increase in the reserve requirement would:
A) decrease excess reserves and reflect an expansionary monetary policy. B) decrease excess reserves and reflect a contractionary monetary policy. C) increase excess reserves and reflect an expansionary monetary policy. D) increase excess reserves and reflect a contractionary monetary policy.
The nominal interest rate
What will be an ideal response?
How does an increase in the price level affect the position of the C + I + G + X curve and in turn the equilibrium level of real GDP?
A. The C + I + G + X curve shifts up, thereby increasing the equilibrium level of real GDP. B. The C + I + G + X curve shifts down, thereby reducing the equilibrium level of real GDP. C. The C + I + G + X curve shifts up, thereby reducing the equilibrium level of real GDP. D. The C + I + G + X curve shifts down, thereby increasing the equilibrium level of real GDP.
The blurring of the lines separating the subsets of the financial industry started in the:
A. 1940s B. 1960s C. 1970s D. 1990s