In 2005–2006, the Fed increased interest rates in an attempt to halt inflation. What was the most likely effect of raising interest rates on velocity?
A. Velocity will decrease.
B. Velocity will increase.
C. Velocity will remain constant.
D. Velocity is unrelated to saving accounts.
Answer: B
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According to the misperceptions theory, when P < Pe, output is ________ its full-employment level and the short-run aggregate supply curve must shift ________ to restore full employment
A) below; upward B) below; downward C) above; upward D) above; downward
Both Sally and Sam receive a 10% raise in a single year. Sally increases her demand for ground beef whereas Sam decreases his demand for ground beef
A) This is impossible. B) This is only possible if Sally considers ground beef an inferior good, and Sam views it as a normal good. C) This is only possible if Sally has lower income than Sam. D) This is only possible if Sally considers ground beef a normal good and Sam views it as an inferior good.