The economy is in the horizontal portion of the AS curve, there is no liquidity trap and investment is sensitive to changes in the interest rate. According to the Keynesian transmission mechanism, if the money supply increases the interest rate will __________, investment spending will __________, the AD curve will shift to the __________, and Real GDP will __________
A) fall; rise; right; not change
B) fall; rise; left; rise
C) rise; rise; right; rise
D) fall; rise; right; fall
E) fall; fall; left; fall
A
Economics
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All of the following characteristics apply to monopolistic competition EXCEPT
A) a large number of firms compete. B) each firm produces the same identical product. C) firms compete on product quality, price, and marketing. D) there are no barriers to enter or exit the industry.
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Suppose that the number of units of good A consumed falls 10 percent when the price of good B falls 5 percent. The cross price elasticity of demand between goods A and B is
A. 2.0. B. 0.2. C. 0.5. D. 5.
Economics