In the short run, following an increase in government purchases,
a. the aggregate expenditure line shifts upward by more than the increase in government purchases
b. real GDP declines by the change in government purchases times the expenditure multiplier
c. the money supply curve shifts rightward because real income rises
d. the interest rate rises because the money demand curve shifts rightward
e. autonomous consumption and investment increase because of the increase in real income
D
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Inflation tends to redistribute real income from lenders to borrowers
a. True b. False Indicate whether the statement is true or false
The following equations represent a simultaneous equations model:
K1= 
1K2+ 
1z1 + u1
K2= 2K1+ 2z2 + u2
OLS will suffer from simultaneity bias if:
A. u1 is correlated with z1.
B. z1 is correlated with z2.
C. K2 is correlated with u1.
D. K1 is correlated with u1.