Starting from long-run equilibrium, a war that raises government purchases results in ________ output in the short run and ________ output in the long run.
A. lower; potential
B. higher; potential
C. higher; higher
D. lower; higher
Answer: B
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A financial innovation, such as the introduction of money market mutual funds, which increases the liquidity of alternatives to money, would
A. increase money demand, shifting the LM curve up and to the left. B. increase money demand, shifting the LM curve down and to the right. C. decrease money demand, shifting the LM curve up and to the left. D. decrease money demand, shifting the LM curve down and to the right.
A shortage exists in a market if a. there is an excess supply of the good
b. quantity supplied exceeds quantity demanded. c. the current price is below its equilibrium price. d. All of the above are correct.
Which of the following is not a component of aggregate demand?
A. Consumption. B. Productivity. C. Investment. D. Net exports.
For monetary policy to be effective in changing planned investment spending:
a. interest rates must not be responsive to changes in the money supply. b. interest rates must be sensitive to changes in Gross Domestic Product. c. investment must be sensitive to changes in interest rates d. investment must be sensitive to changes in the price level. e. interest rates must be sensitive to changes in the price level.