Which of the following is NOT a major assumption of the classical model?
A. People are motivated by self-interest.
B. People can be fooled by money illusion.
C. Wages are flexible.
D. Prices are flexible.
Answer: B
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From 1970 to 2007 the quantity of M1 fell from 20 percent of GDP to less than 10 percent. This change is because the ownership of credit cards ________ during this time period since ________
A) expanded from 18 percent to 76 percent; credit cards became more widely available and utilized B) expanded from 18 percent to 76 percent; there were several recessions during that period C) fell from 76 percent to 18 percent; credit cards became less widely available and utilized D) remained unchanged; credit cards do not affect the quantity of money E) fell from 76 percent to 18 percent; there were several recessions during that period
If the money demand function is given by Md = 10 + 0.2Y ? 10r then a 10-unit increase in the quantity of money will cause the LM schedule to shifts to
a. to the right by 10 units. b. the right by 50 units. c. to the left by 40 units. d. to the left by 50 units. e. to the right by 40 units.
When demand elasticity is ____ in absolute value (or ____), an increase in price will result in a(n) ____ in total revenues
a. less than 1; elastic; increase b. more than 1; inelastic; decrease c. less than 1; elastic; decrease d. less than 1; inelastic; increase e. none of the above
The statement that there is a direct relation between x and y means that
a. x and y move in the same direction b. x causes y c. y causes x d. either y causes x or x causes y e. the causal connection between x and y is immediate