Which of the following best defines the LM curve?
A) the combinations of i and Y that maintain equilibrium in the goods market
B) illustrates the effects of changes in i on investment
C) illustrates the effects of changes in i on desired money holdings by individuals
D) the combinations of i and Y that maintain equilibrium in financial markets
D
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A scooter uses much less gasoline than does a car. Suppose the price of gasoline rises substantially. Which of the figures above best illustrates how this change affects the demand curve for scooters?
A) Figure A only B) Figure B only C) Figure C only D) Figure D only E) Both Figure A and Figure D
If the economy is slipping into a recession, which of the following would be an appropriate fiscal policy?
A) an increase in the money supply and a decrease in interest rates B) a decrease in government purchases C) a decrease in taxes D) a decrease in oil prices