Unit 2 a

Under which of the following conditions would a restrictive monetary policy be most appropriate?

• High inflation

• High unemployment

• Full employment with stable prices

• Low interest rates

• A budget deficit

Which of the following will most likely occur in an economy if more money is demanded than is supplied?

• The amount of investment spending will increase.

• Interest rates will decrease.

• Interest rates will increase.

• The demand curve for money will shift to the left.

• The demand curve for money will shift to the right.

Which of the following transactions would represent an addition to a nation’s current gross domestic product?

• Ms. Smith purchases a share of stock in an automobile company.

• A retailer increases her stock of imported shoes.

• The government increases its domestic purchases of food for use by the military.

• A corporation sells shoes from last year’s inventory.

• A mother sells her car to her daughter.

If a store raises its prices by 20 percent and its total revenue increases by 10 percent, the demand it faces in this price range must be

• Inelastic

• elastic

• unit elastic

• perfectly elastic

• perfectly inelastic