The demand for money curve will shift to the left when
a) the interest rate increases
b) the price level increases
c) aggregate output decreases
d) the price of bonds is expected to decrease
e) all of the above will shift the money demand curve to the left
Answer: c) aggregate output decreases
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Suppose capital and labor are perfect substitutes in a long-run production process. If labor costs $15 per hour and the rental rate of capital is $20 per hour, what can we say about the profit maximizing choice of labor and capital inputs?
A) We will only use labor in the production process B) We will only use capital in the production process C) We will use equal amounts of capital and labor D) The optimal capital-labor ratio is 0.75-to-1.
Other things being equal, an increase in the price of a good leads to an increase in the amount produced. This is known as
A) the law of demand. B) the law of supply. C) ceteris paribus. D) equilibrium.