The direct effect of an increase in the money supply is
A. people will save the money, causing an increase in bank deposits, causing interest rates to fall, and loans to expand.
B. people will spend the extra money, causing the aggregate demand curve to shift to the right and prices to rise, and causing the economy to go into recession.
C. people will save more money, causing a decrease in economic activity and a fall in prices.
D. people will spend the extra money, causing the aggregate demand curve to shift to the right, creating an increase in economic activity.
Answer: D
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The unemployment rate generally falls during ________ in the business cycle
A) a peak B) a recession C) a trough D) an expansion
Assume that the market for barley is in equilibrium and the demand for barley is inelastic. Predict what happens to the revenue of barley farmers if a prolonged drought reduces the supply of barley. The drought will cause farm revenue to
A) fall because of the decrease in the quantity of barley sold. B) rise because there will be a shortage of barley. C) rise because the percentage increase in quantity sold is greater than the percentage increase in price. D) rise because the percentage decrease in quantity sold is less than the percentage increase in price.