Equilibrium Interest Rate
The Supply curve for money is a straight, vertical line because the Fed determines the money supply, and takes in larger considerations than just the interest rate.
The equilibrium rate is determined by the intersection of money demand and supply. If the interest rate moves above or below equilibrium individuals buy or sell securities to hold the amount of money indicated at equilibrium.
You might also like to view...
The assumption of asymmetric information means that
A) borrowers and lenders have the same information. B) borrowers and lenders have perfect information. C) borrowers know more than lenders. D) lenders know more than borrowers.
Do firms really seek to maximize profits?
What will be an ideal response?
In 2013, interest payments were about ____ percent of national income
a. 0.51/2 b. 1.29 c. 3.2 d. 4.0
An increase in the price of product A will:
A. increase the marginal utility per dollar spent on A. B. decrease the marginal utility per dollar spent on A. C. not affect the marginal utility per dollar spent on A. D. cause utility-maximizing consumers to buy more of A.