Ceterus paribus, in the AD/AS/IS/LM model, the immediate short-term effect of a

Question

Ceterus paribus, in the AD/AS/IS/LM model, the immediate short-term effect of a decrease in the marginal productivity of labor function, perhaps caused by an increase in the price of oil, is to increase real income and the price level. to decrease real income and the price level. to increase real income and investment. to decrease real income and increase the price level. Assume that the required reserve ratio is 25 percentage. If the Fed buys from a bank $5 million worth of government bonds (that is, loans made to the Federal government by the bank), the maximum change in the money supply is: dollar25 million. 1.25 millon less than 5 million. more than 5 million. When the economy is in a liquidity trap, one way to get the economy out of a recession is to: expand the money supply. contract the money supply. increase government expenditures. increase taxes. Carter Glass is associated in various ways with the Glass-Steagall act. the foundation of the Fed. Connie Britton. all of the above. Suppose the Central Bank of New Geneland divides to increase the country's money supply by 15 percentage immediately and every year for the foreseeable future. Firms and workers in New Geneland expect this increase to the money supply and immediately raise all prices and wages by 15 percentage and plan to do so every year. Which of the following would be true of the economy of New Geneland under the AD/AS/IS/LM model? The LM curve would shift out. The AD curve would shift in. Output would increase. The nominal interest rate would rise.

Explanation / Answer

22

d.

because as productivity of labours is decreased so there is no increase in real income and the price level will increase .

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