If at the prevailing interest rate the quantity of money demanded is $2 trillion, and the supply of money is $1.5 trillion, then which of the following is true?
A. There is a shortage of money, and consequently interest rates must fall in order to achieve an equilibrium in the money market.
B. There is a surplus of money, and consequently interest rates must fall in order to achieve an equilibrium in the money market.
C. There is shortage of money, and consequently interest rates must rise in order to achieve an equilibrium in the money market.
D. There is a surplus of money, and consequently interest rates must rise in order to achieve an equilibrium in the money market.
Answer: C
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The tax multiplier equals the change in ________ divided by the change in ________
A) taxes; equilibrium real GDP B) equilibrium real GDP; taxes C) taxes; consumption spending D) consumption spending; taxes
The Taste Freeze Ice Cream Company is a perfectly competitive firm producing where MR = MC. The current market price of an ice cream sandwich is $5.00. Taste Freeze sells 200 ice cream sandwiches. Its AVC is $8.00 and its AFC is $3.00. What should Taste Freeze do?
A. Shut down and produce zero sandwiches because price is less than AVC. B. Continue to produce because price exceeds AFC. C. Decrease production so that AVC will decrease. D. Increase production so that AFC will decrease.
Which would most likely shift the aggregate supply curve? A change in the prices of:
A. Domestic products B. Foreign products C. Financial assets D. Resources
According to this Application, one solution proposed to deal with the rising expenses of government entitlement programs is to raise taxes. An increase in taxes to help cover the rising expenses of entitlement programs would
A) increase aggregate demand, shifting the AD curve to the left. B) decrease aggregate demand, shifting the AD curve to the left. C) decrease aggregate demand, shifting the AD curve to the right. D) increase aggregate demand, shifting the AD curve to the right.