Assume a central bank follows a rule that requires it to take steps to keep the price level constant. If the price level fell because of a decrease in aggregate demand and an increase in aggregate supply that kept output unchanged, then
a. the central bank would have to decrease the money supply which would decrease output.
b. the central bank would have to decrease the money supply which would increase output.
c. the central bank would have to increase the money supply which would decrease output.
d. the central bank would have to increase the money supply which would increase output.
d
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Worker migration will cause wage rates to equalize across two countries if all of the following conditions are met except:
A. migration is motivated strictly by wage differentials. B. neither nation restricts or interferes with migration. C. both countries use the same currency. D. migration has no cost.
The graph above shows the relationship between consumption and income. Which of the following statements is correct?
A. The marginal propensity to consume in the economy shown is greater than 1
B. The marginal propensity to consume varies across income levels
C. The average propensity to consume at income level K is given by KM divided by KN
D. The marginal propensity to consume can be calculated by dividing LM by 0K