Assume an economy is in equilibrium at a real GDP of 5 trillion. If aggregate expenditure (AE) increases by 1 trillion, the economy's equilibrium real GDP is likely to _____.
a. increase by 1 trillion
b. increase by more than 1 trillion
c. increase by less than 1 trillion
d. decrease by 1 trillion
e. decrease by more than 1 trillion
QUESTION 2A totally pollution free environment should not be a primary social goal.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 3When the Fed sells U.S. government securities to a member bank, the immediate effect on that bank's balance sheet is a(n):
a. decrease in assets and an increase in liabilities.
b. increase in assets and a decrease in liabilities.
c. increase in both assets and liabilities.
d. decrease in both assets and liabilities.
e. change in the type of assets the bank is holding, but no change in liabilities.
QUESTION 4If the marginal propensity to consume (MPC) equals 0.9, the multiplier is _____.
a. 1
b. 2
c. 5
d. 10
e. 12
QUESTION 5The agency in charge of environmental law is the Environmental Protection Agency.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 6The extent of money expansion will be:
a. greater if banks hold on to excess reserves.
b. greater if private individuals hold on to cash.
c. greater if banks hold on to excess reserves but less if private individuals hold on to cash.
d. less if banks hold on to excess reserves but greater if private individuals hold on to cash.
e. less if banks hold on to excess reserves or private individuals hold on to cash.
QUESTION 7If the spending multiplier is greater than 1.0, a 200 billion increase in autonomous investment will cause:
a. equilibrium investment to increase by less than 200 billion.
b. equilibrium investment to decrease by more than 200 billion.
c. equilibrium real GDP demanded to increase by more than 200 billion.
d. equilibrium real GDP demanded to decrease by less than 200 billion.
e. equilibrium saving to decrease by more than 200 billion.
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