Which of the following best describes how an increase in the money supply shifts aggregate demand?
A. The money supply shifts right, prices fall, spending increases, and aggregate demand shifts right.
B. The money supply shifts right, the interest rate falls, investment increases, and aggregate demand shifts right.
C. The money supply shifts right, prices rise, spending falls, and aggregate demand shifts left.
D. The money supply shifts right, the interest rate rises, investment decreases, and aggregate demand shifts left.
Ans: B. The money supply shifts right, the interest rate falls, investment increases, and aggregate demand shifts right.
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An instrument rule is based on ________ of the economy while a targeting rule is based on ________ of the economy
A) the current state; the previous state B) a forecast; the previous state C) the previous state; the current state D) the current state; a forecast E) a forecast; the current state
Credence goods are particularly susceptible to the lemons problem because
A) they have qualities that are difficult for producers to fully assess. B) they have qualities that are difficult for consumers to fully assess. C) creative responses among producers create volatility in market supply. D) creative responses among consumers create volatility in market demand.