If a product has only a few acceptable substitutes, demand for the product is most likely to be:
A. very inelastic.
B. inelastic.
C. elastic.
D. very elastic.
Answer: B
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Which school of thought believes that recessions are the result of inappropriate monetary policy?
A) only classical B) only Keynesian C) Monetarist D) both Keynesian and classical
If the Fed buys U.S. Treasury securities, then this
A) increases reserves, causes banks to reduce their loans, and increases the money supply. B) decreases reserves, causes banks to reduce their loans, and decreases the money supply. C) increases reserves, encourages banks to make more loans, and increases the money supply. D) decreases reserves, causes banks to reduce their loans, and increases the money supply.
If the yield curve is flat for short maturities and then slopes downward for longer maturities, the liquidity premium theory (assuming a mild preference for shorter-term bonds) indicates that the market is predicting
A) a rise in short-term interest rates in the near future and a decline further out in the future. B) constant short-term interest rates in the near future and a decline further out in the future. C) a decline in short-term interest rates in the near future and a rise further out in the future. D) a decline in short-term interest rates in the near future and an even steeper decline further out in the future.
A rightward shift of the money supply ________
A) may come about from an increase in the quantity of money supplied by the Federal Reserve B) may come about from a decrease in the price level C) leads to a decrease in interest rates ceteris paribus D) all of the above E) none of the above