HW2-Key - Economics 2006, Homework No. 2. Due on February...

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Economics 2006, Homework No. 2. Due on February 23 [1]In Freedonia there is a 10% increase in the nominal money supply. As a result, according to the classical model, which of the following will occur? 1. Equilibrium output will rise. 2. The equilibrium interest rate will fall. 3. Employment will rise. 4. Each of 1-3. 5. Neither of 1-3. [2]Assume that the output market is in equilibrium. Given the following information, what is the quantity of funds demanded (and supplied) in the loanable funds market? Consumption Spending $4.0 trillion Net Taxes $2.4 trillion Household Saving $4.2 trillion Investment Spending $3.0 trillion Government Purchases $3.6 trillion 1. $6.4 trillion 2. $4.2 trillion 3. $2.0 trillion 4. $6.6 trillion 5. $4.6 trillion [3]In the loanable funds market, a decrease in government purchases ( G Δ <0) will cause _____. 1. an increase in equilibrium investment. 2. A decrease in the equilibrium interest rate. 3.
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This note was uploaded on 04/23/2009 for the course ECON 2006 taught by Professor Rdcothren during the Spring '08 term at Virginia Tech.

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HW2-Key - Economics 2006, Homework No. 2. Due on February...

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