Other things equal, an increase in the price level ________ the equilibrium interest rate and ________ equilibrium output.
A. increases; decreases
B. decreases; increases
C. decreases; decreases
D. increases; increases
Answer: A
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The demand for money curve is shown in the figure above. A movement from point B to point C could be the result of
A) a rise in the real interest rate. B) an increase in the quantity of money held by banks. C) a fall in the nominal interest rate. D) a rise in the real interest rate matched by an equal fall in the nominal interest rate. E) a decrease in the total benefit from holding money.
Suppose you find $1000 in your attic and decide to deposit it all into your local bank, which must hold 10% as required reserves. The deposit expansion multiplier suggests that this $1,000 "injection" of new money will, in reality, most likely
A) increase the money supply by more than $1,000. B) increase the money supply by less than $1,000. C) increase the money supply by exactly $1,000. D) increase the money supply by exactly $10,000.
The most effective mechanism for reducing runs on banks is _____
a. the discount rate b. deposit insurance c. the reserve requirement d. open-market operations e. the Federal Reserve note
Suppose that a curve has a slope equal to zero at some point A. To the right of A, the curve may
a. have a positive slope. b. have a negative slope. c. be a straight line. d. All of the above are correct.