Questions from General Economics

Q: First, imagine that both input and output prices are fixed in

First, imagine that both input and output prices are fixed in the economy. What does the aggregate supply curve look like? If AD decreases in this situation, what will happen to equilibrium output and...

Q: Suppose that the money supply is $1 trillion and money velocity

Suppose that the money supply is $1 trillion and money velocity is 4. Then the equation of exchange would predict nominal GDP to be: a. $1 trillion. b. $4 trillion. c. $5 trillion. d. $8 trillion.

Q: If the money supply fell by 10 percent, a monetarist would

If the money supply fell by 10 percent, a monetarist would expect nominal GDP to _________. a. Rise. b. Fall. c. Stay the same.

Q: An economy is producing at full employment when AD unexpectedly shifts to

An economy is producing at full employment when AD unexpectedly shifts to the left. A new classical economist would assume that as the economy adjusted back to producing at full employment, the price...

Q: Use an AD-AS graph to demonstrate and explain the price

Use an AD-AS graph to demonstrate and explain the price-level and real-output outcome of an anticipated decline in aggregate demand, as viewed by RET economists. (Assume that the economy initially is...

Q: Place “MON,” “RET,” or “MAIN” beside

Place “MON,” “RET,” or “MAIN” beside the statements that most closely reflect monetarist, rational expectations, or mainstream views, respectively: a. Anticipated changes in aggregate demand affect o...

Q: Explain carefully: “A change in the price level shifts the

Explain carefully: “A change in the price level shifts the aggregate expenditures curve but not the aggregate demand curve.”

Q: Suppose that the price level is constant and that investment decreases sharply

Suppose that the price level is constant and that investment decreases sharply. How would you show this decrease in the aggregate expenditures model? What would be the outcome for real GDP? How would...

Q: True or False: If spending exceeds output, real GDP will

True or False: If spending exceeds output, real GDP will decline as firms cut back on production.

Q: If a $50 billion initial increase in spending leads to a

If a $50 billion initial increase in spending leads to a $250 billion change in real GDP, how big is the multiplier? a. 1.0. b. 2.5. c. 4.0. d. 5.0.