The Keynesian cause-and-effect sequence predicts that a decrease in the money supply will cause interest rates to:
A. fall, boosting investment and shifting the AD curve rightward, leading to an increase in real GDP.
B. fall, boosting investment and shifting the AD curve rightward, leading to a decrease in real GDP.
C. rise, cutting investment and shifting the AD curve leftward, leading to a decrease in real GDP.
D. rise, boosting investment and shifting the AD curve rightward, leading to an increase in real GDP.
Answer: C
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According to the traditional Keynesian approach, a tax cut raises aggregate demand because
A) a tax cut always results in a balanced budget. B) taxes are part of the C + I + G + X line. C) taxpayers anticipate a tax increase in the future. D) disposable income available to consumers increases.
If a consumer buys a good, we know that their willingness to pay:
A. is greater than its price. B. is less than its price. C. is equal to its price. D. is either greater than or equal to its price.