Use the following diagrams to answer the next question.
Assume the economy is on aggregate demand AD1. The Fed should ________.
A. move from MS1 to MS3 to raise interest rate and raise investment
B. move from MS1 to MS3 to raise interest rate and lower investment
C. move from MS1 to MS2 to lower interest rate and lower investment
D. move from MS1 to MS2 to lower interest rate and increase investment
Answer: D
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If an isocost line crosses the isoquant twice, a cost minimizing firm will
A) use a different isocost line to select the bundle of inputs. B) use the input bundle associated with the intersection on the higher point of the isoquant. C) use the input bundle associated with the intersection on the lower point of the isoquant. D) Both B and C.
The ratio of U.S. government spending to GDP reached its peak during:
a. World War I. b. World War II. c. the Great Depression. d. the real estate crisis. e. the bursting of the stock market bubble.
A critical assumption in economist A. P. Lerner's theory explaining why society's total utility is maximized with income equality is
a. there is no "level playing field" in people's choice of employment b. people have identical utility functions c. the rich earn their income by exploiting the poor d. people have equal skills if given equal opportunity e. the law of diminishing marginal utility does not apply to money
Two studies published in the New England Journal of Medicine link the risk of breast cancer to alcohol consumption. Young women who have nine drinks per week were reportedly 150 percent more likely to develop breast cancer. According to economic analysis, how would this information affect the market for alcohol?
a. Demand will increase, placing upward pressure on price. b. Supply will decrease, placing downward pressure on price. c. Demand will decrease, placing downward pressure on price. d. Supply will increase, placing upward pressure on price.