Suppose that households became mistrustful of the banking system and decide to decrease their checking account balances and increase their holdings of currency. Using the money demand and money supply model and assuming everything else is held constant,
the equilibrium interest rate should
A) increase.
B) decrease.
C) not change.
D) increase, then decrease.
Answer: A
You might also like to view...
A firm that responds to a regulatory rule in a way that permits technical compliance while allowing the firm to violate the spirit of the regulation has
A) reduced the scope of the lemons problem. B) shared the gains and pains of regulation. C) engaged in a creative response to regulation. D) become a captured regulator.
In the short run, a firm should shut down when
A) P < AVC. B) P > MC. C) MR > MC. D) MR = ATC.
An appreciation of the Japanese yen relative to the U.S. dollar will
a. increase aggregate demand in the United States. b. increase aggregate supply in the United States. c. increase aggregate demand in Japan. d. decrease aggregate supply in Japan.
The various quantities of output that all market participants are willing and able to buy at alternative price levels in a given time period is:
A. Market demand. B. Aggregate demand. C. Market supply. D. Aggregate supply.