If the interest rate decreases, there will be
a. a movement leftward from one point on the money demand curve to another point on the same curve
b. no change in the quantity of money demanded
c. a leftward shift of the entire money demand curve caused by a demand shock
d. a rightward shift of the entire money demand curve
e. a movement rightward from one point on the money demand curve to another point on the same curve
E
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While Modigliani's LCH is similar to Friedman's PIH in several ways, it does differ in that it
A) assumes individuals base their consumption decisions on a time span greater than one year. B) assumes that individuals prefer to maintain a stable consumption pattern. C) attempted to reconcile the seemingly paradoxical cross-section and time-series empirical data. D) gives an important role to assets as a determinant of consumption behavior.
Starting from long-run equilibrium, a large tax cut will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; higher B. expansionary; higher; potential C. recessionary; higher; potential D. recessionary; lower; lower