Suppose you withdraw 1,000 from your savings account and put it in your checking account. Briefly explain how this will affect M1 and M2.
What will be an ideal response?
Ques. 2When the price of gasoline rises, some consumers begin riding their bikes more frequently or riding the bus instead of driving their cars. The fact that the CPI does not fully account for such changes in consumer behavior is called
A) increase in quality bias. B) outlet bias.
C) substitution bias. D) discrimination bias.
Ques. 3If the marginal propensity to consume is 0.6, the marginal propensity to save is
A) 0.4. B) 0.6. C) 1. D) 1.5.
Ques. 4Refer to Figure 28-2. Suppose the economy is at point C in the figure above. If workers adjust their expectations of inflation, which of the following will be true?
A) The natural rate of unemployment is 6.
B) Workers and firms expect inflation to be 1.
C) The short-run Phillips curve will shift to the left.
D) The short-run Phillips curve will shift to the right.
E) The economy will move from C to A.
Ques. 5An increase in the government budget deficit will shift the ________ curve for loanable funds to the ________ and the equilibrium real interest rate will ________.
A) supply; right; fall B) supply; left; rise C) demand; left; fall D) demand; right; rise
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