In the simple accelerator theory an
A) increase in actual sales will always lead to an increase in investment.
B) increase in actual output will not lead to an increase in expected sales.
C) increase in actual sales will lead to an increase in replacement investment.
D) increase in the size of the increase in actual sales will lead to an increase in next period's net investment.
D
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Starting from potential output, if consumer confidence decreases and consumers decide to spend less, then this will generate a(n) ________ gap and inflation will ________.
A. recessionary; increase B. expansionary; increase C. expansionary; decrease D. recessionary; decrease
Keynes's model of the demand for money suggests that velocity is ________ related to ________
A) positively; interest rates B) negatively; interest rates C) positively; bond values D) positively; stock prices
Exhibit 1A-7 Straight line relationship
Which of the following would cause a shift in the relationship shown in Exhibit 1A-7?
A. A rise in people's annual income. B. A rise in people's expenditure on air travel. C. A rise in the price of air travel. D. Nothing will shift the line in the graph.
The economy pictured in the figure below has a(n) ________ gap with a short-run equilibrium combination of inflation and output indicated by point ________. 
A. recessionary; B B. recessionary; C C. recessionary; A D. expansionary; A