Which of the following statements is true?
A. Keynesians believe that consumers are inherently unstable in consumption decisions, but that businesses are relatively stable in making investment decisions.
B. Monetarists believe in discretionary monetary policy.
C. Lowering tax rates is the main priority of supply side economists.
D. Supply-side economists believe in a heavily regulated economy.
C. Lowering tax rates is the main priority of supply side economists.
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In the long run, the effect of a reduction in the money supply is to
A) decrease both the price level and real Gross Domestic Product (GDP). B) decrease real Gross Domestic Product (GDP) only. C) decrease the price level and increase real Gross Domestic Product (GDP). D) decrease the price level only.
Suppose a bond promises to pay its holder $100 a year forever. The interest rate on the bond rises from 4 percent to 5 percent. The price of the bond
A) falls from $2,500 to $2,000. B) does not change because it is not affected by the interest rate. C) falls from $25,000 to $20,000. D) rises from $2,000 to $2,500.
An example of a microeconomic decision is a situation in which
A) the Federal Reserve considers how much to increase the money supply during the coming month in an effort to constrain the rate of inflation. B) Congress and the president seek to reach a compromise on how much to increase government spending in an effort to influence national expenditures. C) a firm evaluates how much to reduce the price of its product in an effort to influence sales and boost its profits. D) the U.S. Treasury contemplates buying foreign currencies in an effort to influence exchange rates with an aim to boosting demand for U.S. goods and services.
Describe what happens to nominal and real interest rates, investment and aggregate demand when money supply shifts right or left, other things equal. When money demand shifts right or left