Which of the following statements is most correct?
A. The Fed can control the size of the monetary base but not the price of its components.
B. The Fed can control either the size of the monetary base or the price of its components.
C. The Fed can control the amount of reserves, but cannot control the monetary base.
D. The Fed can control the make up of the monetary base, but cannot affect the market interest rate.
Answer: B
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One reason supply curves have an upward slope is because
A) increased supply will require increased technology. B) to have more of the good supplied requires more firms to open. C) people will pay a higher price when less is supplied. D) a higher price brings a greater profit, so firms want to sell more of that good. E) None of the above answers is correct because supply curves have a downward slope.
Refer to Figure 13-1. Ceteris paribus, an increase in firms' expectations of the future profitability of investment spending would be represented by a movement from
A) AD1 to AD2. B) AD2 to AD1. C) point A to point B. D) point B to point A.
If the optimal forecast of the return on a security exceeds the equilibrium return, then
A) the market is inefficient. B) no unexploited profit opportunities exist. C) the market is in equilibrium. D) the market is myopic.
An investor has to choose between stocks A&B, each selling for $10 . Stock A, can either increase in price to $12, with a 50% probability or stay at $10 with a 50% probability. Stock B can either increase in price to $15 with a 50% probability or go down to $7 with a 50% probability. Which of the stocks would the investor choose
a. Stock A b. Stock B c. None of the stocks d. The investor would exit the market