Suppose the economy was in equilibrium, and the national government increased spending by $200 billion. Monetarist theory would predict that the nation's:
a. Real risk-free interest rate will rise causing real GDP to fall.
b. Real risk-free interest rate will rise causing the monetary base, and therefore, the money supply to rise.
c. Real risk-free interest rate will remain unchanged, but the money multiplier will rise.
d. Real risk-free interest rate will fall causing real GDP to rise.
e. Real risk-free interest rate will rise but real GDP will remain the same.
.E
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The statement "If Harvey goes to Subway then Candice should go to Subway, and if Harvey goes to Taco Bell, then Candice should go to Taco Bell" is an example of locating equilibria by using the technique known as
A) mutual interdependence. B) cooperative coordination. C) cell-by-cell inspection. D) best-response analysis.
In calculating GDP, household production is
A) included as part of consumption. B) ignored because it is not a large amount. C) not included because there is no market transaction. D) included under employee compensation.