Which of the following is true regarding utility along a price-consumption curve?
A) It is constant.
B) It changes from point to point.
C) It changes only if income changes.
D) It changes only for normal goods.
B
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Why does a high interest rate discourage people from holding their money in cash?
(A) They are fearful of inflation. (B) They cannot be sure that cash will hold its value. (C) They are more concerned that it will be stolen. (D) They can earn interest on the cash if it is invested.
Initially, the economy is in long-run equilibrium. The aggregate demand curve then shifts $80 billion to the left. The government wants to change spending to offset this decrease in demand. The MPC is 0.75 . Suppose the effect on aggregate demand of a tax change is 3/4 as strong as the effect of a change in government expenditure. There is no crowding out and no accelerator effect. What should
the government do if it wants to offset the decrease in real GDP? a. Raise both taxes and expenditures by $80 billion dollars. b. Raise both taxes and expenditures by $10 billion dollars. c. Reduce both taxes and expenditures by $80 billion dollars. d. Reduce both taxes and expenditures by $10 billion dollars.