When prices rise, consumers and businesses hold larger money balances. This reduces the supply of loanable funds, increases the interest rate, and discourages both consumption and investment. This process is called the:
A. interest-rate effect.
B. real balance effect.
C. investment effect.
D. disinvestment effect.
Answer: A
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Every country in the world has an independent central bank
Indicate whether the statement is true or false
In Figure 5.1, the marginal utility of income is
A) increasing as income increases. B) constant for all levels of income. C) diminishes as income increases. D) None of the above is necessarily correct.
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A. money saved domestically is invested in another country. B. money saved in another country finances domestic investment. C. there is a negative difference between capital inflows and capital outflows for a country. D. there is a positive difference between capital inflows and capital outflows of a country.
Direct controls work if
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