When the price of steel rises, Ford uses more aluminum in the production of its cars. This is an example of
a. substitution in consumption.
b. substitution in production.
c. a change in the marginal productivity of a resource.
d. derived demand.
B
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If the Fed’s monetary policy causes a substantial decrease in interest rates, what is the most likely impact on velocity?
A. Velocity will decrease. B. Velocity will increase. C. Velocity will remain constant. D. Velocity is unrelated to interest rates.
In the IS-LM model, the fiscal multiplier effect can be increased by
A) larger increases in government expenditure. B) expansions of the money supply. C) contractions of the money supply. D) raising the income tax rate.
Political candidates tend to be very similar in a representative democracy because _____
a. most candidates are wealthy b. the average voter demands conformity c. of cyclical majorities d. party platforms converge toward the median voter
Other things being equal, what is the effect of government deficit increases on interest rates?
A. Interest rates decline. B. Interest rates rise. C. There is no impact unless the Federal Reserve decides to alter the money supply. D. Interest rates hold constant because the demand for credit decreases.