The demand curve facing Imelda's Shoe Boutique, a monopolistically competitive firm,
a. is horizontal because Imelda's is small relative to the market as a whole
b. is horizontal because Imelda's is large relative to the market as a whole
c. slopes downward because Imelda's is small relative to the market as a whole
d. slopes downward because Imelda's sells a differentiated product
e. slopes downward because Imelda's firm is the entire industry
D
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Other things the same, a higher interest rate induces people to
a. save more, so the supply of loanable funds slopes upward. b. save less, so the supply of loanable funds slopes downward. c. invest more, so the supply of loanable funds slopes upward. d. invest less, so the supply of loanable funds slopes downward.
Suppose the government attempts to stimulate the economy by increasing spending without increasing taxes. Which of the following statements is most likely to be accepted by someone who believes in crowding out?
A) The government's actions will have their intended effect. B) The government's actions will cause businesses to become more optimistic about the economy, and they will increase their output even more than the government had intended. C) The government's actions will raise interest rates, causing decreased investment and consumption, and the economy will not expand as much as the government had intended. D) This is a trick question, because the federal government is required by law to increase taxes by the same amount as it increases expenditures.