Using Figure 1 above, if the aggregate demand curve shifts from AD3 to AD2 the result in the short run would be:
A. P3 and Y1.
B. P2 and Y1.
C. P2 and Y3.
D. P1 and Y2.
Answer: B
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Suppose you withdraw $1,000 from your checking account. If the reserve requirement is 20 percent, how does this transaction affect the supply of money and the excess reserves of your bank?
a. There is no change in the supply of money; your bank's excess reserves are reduced by $800. b. There is no change in the supply of money; your bank's excess reserves are reduced by $200. c. The money supply increases by $1,000 . and the excess reserves of your bank are reduced by $800. d. The money supply increases by $1,000 . and the excess reserves of your bank are reduced by $200.
The price index was 150 in the first year, 160 in the second year, and 165 in the third year. Which of the following statements is correct?
a. The price level was higher in the second year than in the first year, and it was higher in the third year than in the second year. b. The inflation rate was positive between the first and second years, and it was positive between the second and third years. c. The inflation rate was lower between the second and third years than it was between the first and second years. d. All of the above are correct.
Which statement is true?
A. All monopolies are large firms. B. The monopolist produces a product similar to its competitors. C. There is no such thing as a natural monopoly. D. There are no close substitutes for a monopolist's product.
Suppose a consumption function is given as C = $500 + 0.75YD. The marginal propensity to consume is
A. 0.75. B. -0.75. C. 0.25. D. 200.