What will be the effects of an increase in the money supply on the interest rate?
What will be an ideal response?
An increase in the money supply will cause interest rate to decrease. This should increase investment and possibly consumption of durable goods. The reduction in the interest rate will cause a depreciation of the dollar.
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The phenomenon which occurs when markets do not produce the most efficient outcome on their own is known as
A) market failure. B) imperfect information. C) economic certainty. D) public goods.
Although foreign exchange market trades are said to involve the buying and selling of currencies, most trades involve the buying and selling of
A) bank deposits denominated in different currencies. B) SDRs. C) gold. D) ECUs.
When interest rates in the U.S. decline, we can expect net capital outflow to:
A. increase. B. be zero. C. decrease. D. be unaffected.
When most shocks originate in the monetary sector, it is generally better to have
A) a flexible rate system. B) a fixed rate system. C) a gold standard. D) a managed float.