ECON 302 Chapter 24: Chapter 24 Mishkin Summary.docx
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*An increase in the liquidity of bonds should cause the demand curve for bonds to shift to the ____ , and consequently, the equilibrium price should ____ .
right; fall |
right; rise |
left; rise |
left; fall *Suppose that there is $400 in cash and $160 in travelers checks in the economy, and nothing else. Then M1 must be $ ____ and the amount of M2 is $ ____ .
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According to classical economists, which one of the following is the correct (recommended) sequence of occurrences?
A. | The economy is in a recession, production falls and unemployment rises ==> the government increases spending, the money supply, and lowers taxes ==> total spending rises ==> employment rises ==> GDP rises |
B. | The economy is in a recession, production falls and unemployment rises ==> prices, wages, and interest rates decrease ==> business costs fall, profits rise, borrowing and consumer spending rise ==> employment and production rise ==> GDP rises |
C. | The economy is in an expansion, incomes are rising and production increases ==> the government decreases spending ==> less inflation ==> the economy continues to expand |
D. | The economy is in a recession, production falls and unemployment rises ==> spending falls ==> more layoffs ==> less production ==> more layoffs ==> deeper recession |
E. | The economy is in an expansion ==> prices rise ==> consumer spending falls ==> production falls ==> the economy contracts (recession) |