The economy is in equilibrium, TP = TE, and Real GDP is $4,555 billion. The MPC is 0.80, the multiplier is operative, and idle resources exist at each expenditure round. Government purchases rise by $10 billion. As a result, the __________ curve shifts __________, inventory levels unexpectedly __________, business firms ___________ the quantity of goods and services they produce, and Real GDP
__________ by __________.
A) TE; downward; fall; increase; rises; $10 billion.
B) TP; rightward; fall; decrease; falls; $50 billion
C) TE; upward; fall; increase; rises; $50 billion
D) TE; downward; rise; increase; rises, $50 billion
C
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According to the interest-rate-based monetary policy transmission mechanism, a decrease in the money supply will
A) lead to an increase in investment spending and a decrease in real GDP which is greater than the increase in investment spending. B) lead to a decrease in investment spending and an increase in real GDP that is equal to the decrease in investment spending. C) lead to a decrease in investment spending and a decrease in real GDP which is greater than the decrease in investment spending. D) lead to an increase in investment spending and a decrease in real GDP that is equal to the increase in investment spending.
If additional information is not used when forming an optimal forecast because it is not available at that time, then expectations are
A) obviously formed irrationally. B) still considered to be formed rationally. C) formed adaptively. D) formed equivalently.