Whenever there is excess demand for real balances, short-run adjustment occurs because:
a. savers and investors buy bonds and drive up their prices (drive down nominal rates of interest).
b. investors and borrowers sell bonds (convert to cash) and drive down their prices (drive up nominal rates of interest).
c. the price level falls to restore real balances.
d. aggregate demand is decreased to restore equilibrium.
Answer: b. investors and borrowers sell bonds (convert to cash) and drive down their prices (drive up nominal rates of interest).
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Indicate whether the statement is true or false
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C. You need to put both salaries into real dollars in the same year for comparison.
D. There is no real way to compare the two without more information.
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a. True b. False Indicate whether the statement is true or false