Higher interest rates and, therefore, a decrease in investment spending are most likely to be caused by which policy mix?
A. Deficit reduction and expansionary monetary policy
B. Larger deficits and contractionary monetary policy
C. Larger deficits and expansionary monetary policy
D. Deficit reduction and contractionary monetary policy
Answer: B
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Assume the asset market is always in equilibrium. Therefore a fall in Y would result in
A) higher inflation abroad. B) a decreased demand for domestic products. C) a contraction of the money supply. D) a depreciation of the home currency. E) an appreciation of the home currency.
Assume a perfectly competitive firm sells its output for $150 per unit. At its current 2,000 units of output, marginal cost is $180 and increasing, and average variable cost is $160 . Assuming it wants to maximize its profits, it should: a. increase output
b. decrease output, but not shut down. c. maintain its current output rate. d. shut down.