If the Price Level Is Taken as Given in a Simple

question 99

Multiple Choice

If the price level is taken as given in a simple macro model with demand-determined output,it is implicitly being assumed that

• A)net exports are positive.
• B)net exports are negative.
• C)the marginal propensity to consume out of disposable income is equal to the marginal propensity to spend out of national income.
• D)all resources in the economy are fully employed.
• E)producers can provide whatever output is demanded of them without requiring higher prices to offset any higher costs.

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Definitions:

Effective Interest Rate

The true rate of simple interest.

Contract Interest Rate

The agreed-upon rate of interest that will be charged or paid on a financial contract, such as a loan or bond.

Issued at Discount

When a bond or other security is sold for less than its face value.

Semiannually

Referring to an event or action that takes place twice every year, often at six-month intervals.