When the Fed raises the federal funds rate,
A) the real interest rate is unchanged so investment and consumption expenditure are not changed.
B) the real interest rate increases, thereby decreasing investment and consumption expenditure.
C) the real interest rate falls, thereby increasing investment and consumption expenditure.
D) investment and consumption expenditure increase, thereby raising the real interest rate.
E) the real interest rate increases, thereby decreasing investment and increasing consumption expenditure.
B
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Voluntary exchange
a. is usually beneficial to one party, but not the other. b. is always beneficial to both parties. c. is occasionally beneficial to both parties. d. occurs only between nations, not between individuals.
Figure 10-3
In Figure 10-3, we would expect the aggregate supply curve in graph (b) to eventually
a.
shift to the right, eliminating the recessionary gap.
b.
shift to the left, eliminating the inflationary gap.
c.
become steeper in the upper portion, eliminating the inflationary gap.
d.
become flatter in the upper portion, eliminating the recessionary gap.