When the Fed engages in contractionary monetary policy, which of the following happens after the money supply is decreased?
a. RGDP increases.
b. The quantity of services demanded increases.
c. Interest rates increase.
d. Investment is less costly.
c. Interest rates increase.
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Owners of a coffee shop finds that they can sell 150 donuts a day when the price of a donut is $1.20. When they price donuts at $1, they sell 170 donuts. The absolute value of the price elasticity of demand for donuts is
A) 0.69. B) 1.45. C) 1.00. D) infinity.
Which of the following tends to make the size of a shift in aggregate demand resulting from a tax change smaller than would otherwise be the case?
a. the multiplier effect b. the crowding-out effect c. expansionary monetary policy d. None of the above is correct.
Which of the following actions would help the Fed increase the supply of money in the economy?
a. buying government bonds b. raising the reserve ratio c. selling government bonds d. raising the discount rate
Suppose Moni thinks a 100 percent increase in her hourly wage is an incentive to work more hours while the price level also increases by 100 percent. Moni is said to be suffering from
A. money illusion. B. irrationality. C. rationality. D. the effects of competition.