Use the following diagram to answer the next question.
Assume the economy is initially at the full employment level of real GDP. If there is a decrease in gross investment, the Fed should ________.
A. increase the money supply
B. decrease money demand
C. increase money demand
D. decrease the money supply
Answer: A
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The labels for the axes of the aggregate demand graph should be ________.
A. quantity of a product on the vertical axis and the price of a product on the horizontal axis B. real domestic output on the vertical axis and the price level on the horizontal axis C. real domestic output on the horizontal axis and the price level on the vertical axis D. price of a product on the vertical axis and quantity of a product on the horizontal axis
If a firm is practicing third-degree price discrimination and is charging a price of $5 per unit to consumers in Group A and a price of $9 to consumers in Group B, which of the following is true?
A) Group A consumers are less responsive to price changes than Group B consumers. B) Group A consumers have a lower price elasticity than Group B consumers. C) Group B consumers have a greater price elasticity than Group A consumers. D) Group A consumers have a greater price elasticity than Group B consumers.
The assumption of rational behavior:
A. offers a perfect framework for how people actually behave. B. helps economists explain about how people behave in a way that will best achieve their goals. C. explains why people voluntarily engage in decisions for which costs exceed benefits. D. is best applied to psychology and should not be used in the science of economics.
If consumption is $8 billion, investments is $4 billion, government purchases are $2 billion, imports are $1 billion, and exports are $2 billion, GDP must equal:
A. $17 billion. B. $14 billion. C. $15 billion. D. $16 billion.